Deposit Protec�on Corpora�on

A subsidiary of State Bank of Pakistan

Safeguarding Depositors’ Trust

ANNUAL REPORT
2022-23
 Integrity

Courage

Excellence

Result Oriented

Accountability
DPC’s

Teamwork
Core Values
 To protect depositors’ funds in order to maintain public confidence in the
banking system and support financial stability

100% Increase in the Guaran-

tee Amount

Awareness Ini�a�ves for

General public

Protec�on to 98% of Total

Depositors

Development of Deposit
Protec�on Mechanism for
To be an effec�ve provider of deposit protec�on in line with Islamic Banks
interna�onal standards
Development of Deposit
Protec�on Mechanism for
Conven�onal Banks

Commencement of
Opera�ons - 2018
 DPC 14
TABLE OF CONTENTS
Expanding the Scope of Coverage
to Digital & Microfinance Banks
under DPC’s Safety Net
ANNUAL REPORT
2022-23
16 Know the Deposit Protec�on
Scheme |Public Awareness

24 Capacity Building

01 Chairman’s
28 Deposits, Premium & Coverage

32
Note

03
Strategic Plan of DPC
Message from
Managing Director

05 Governance Structure 34 Risk Governance and

Management

10
Promo�ng Financial Stability
through Deposit Insurance –
Mandate and Objec�ves of DPC 36 Key Financial Highlights

12 Reimbursement to the Eligible

Depositors of SME Bank 41 Annual Financial Statements
01 Annual Report 2022-23 Chairman’s Note 02
Chairman’s Note of number of depositors, out of total 73 million
depositors of DPC member banks, more than 98

I
t is a ma�er of great honor for me to have been
entrusted with the responsibility of Chairmanship of
the Board of Directors of the Deposit Protec�on
Corpora�on (DPC).
As I reflect on the five-year performance of the Corpo-
ra�on since its establishment, it is encouraging to note
that DPC enhanced its coverage amount by 100 percent
within a short span of three years from the commence-
ment of its opera�ons. It has managed to build a credi-
ble Deposit Protec�on Fund
(DPF), which, as of June 2023,
94 percent of the
has surpassed PKR 100 billion
mark. Notably, the Corpora-
�on has aptly fulfilled its
primary mandate recently by
reimbursing majority of the
depositors are
eligible depositors of SME
Bank Limited, which was
en�tled to a full
declared a failed ins�tu�on by
the State Bank of Pakistan
reimbursement
(SBP) under the DPC Act in
May 2023. in the unlikely
Moreover, the financial posi- event of a bank’s
failure.
�on of the Corpora�on also
reflects an appreciable prog-
ress. Con�nuing the trend of
the preceding years, the year
2022-23 has also seen a signifi--
cant increase in the income from a prudently managed
investment por�olio, propelling net assets beyond PKR
100 billion.
The global economic and financial system has
witnessed emergence and confluence of daun�ng
challenges over the recent years. The COIVD-19
pandemic and lockdowns, which brought the global
economic ac�vity to a halt, were followed by commodi-
ty super-cycle, geo-poli�cal conflicts and infla�onary
pressures. The consequent �ghtening of monetary
policy by major economies, in turn, significantly �ght-
ened the macro-financial condi�ons, presen�ng
challenges to stability of financial systems across the
world, and Pakistan was no excep�on. However, SBP’s
prudent regulatory and supervisory framework and
bespoke response to contemporary challenges helped
percent have been covered under this scheme. I am
the banking industry sail smoothly through the turbu-
also pleased to highlight that with the protected
lent condi�ons. The banking sector maintains its resil-
deposit amount prescribed by the Corpora�on,
ience and has emerged as one of the profitable sectors
around 94 percent of the depositors are en�tled to a
of the economy.
full reimbursement in the unlikely event of a bank’s
failure.
To maintain stability of the banking system, it is cri�cal
that both banking supervision and deposit insurance –
As Chairman of the Board of Directors, I would like to
which are the two cri�cal features of the financial
highlight that the Board has been ac�vely discharg-
safety net – are effec�ve and dynamic to cope with the
ing its responsibility of oversight and se�ng strategic
emerging challenges. Therefore, SBP regularly reviews
direc�on of the Corpora�on. In this perspec�ve, five
and update its supervisory frame-
frame
mee�ngs of the Board were held during FY 2022-23.
work to address the dynamics of
Besides discharging its regular oversight func�ons,
markets and adopt the emerg-
emerg
the Board approved some of the key ini�a�ves for
ing best prac�ces and stan-
stan
the opera�onal effec�veness and policy-level effica-
dards. On this front, SBP
introduced an ongoing
risk-based supervisory frame-
cy of the DPC. These ini�a�ves include a framework
for reimbursement to protected depositors, Strategic
work for all banks in Pakistan
and took various measures to
Plan for next five years, and above all, dra� amend-
ments to the DPC Act, 2016.
enhance its capacity for deal-
ing with problem banks.
In the wake of evolving economic challenges and
uncertain�es at both global and domes�c front,
Apart from SBP’s numerous
policy responses to improve
our resolve to protect financially unsophis�cated
depositors remains steadfast. Let me assure the
the effec�veness of its super-
visory framework, the DPC,
stakeholders of my commitment to uphold the
Corpora�on's mission of safeguarding eligible
on its part, also further
deposits and contribu�ng towards SBP’s objec�ve of
enhanced its opera�onal
maintaining financial stability.
capacity and increased the
protected amount for eligible
Finally, I would also like to thank our safety net part-
depositors from PKR 250,000
ners, stakeholders, management of DPC and
to PKR 500,000 on the basis of ‘per depositor per bank
our dedicated team of professionals for
principle’ under its deposit protec�on scheme. More-
their con�nued support and confidence
over, as a part of SBP’s ini�a�ves to improve the bank
in our efforts.
resolu�on regime, significant amendments have also
been proposed in the DPC Act 2016. These amend-
ments would enhance the role of the DPC in the resolu- Dr.Inayat Hussain
�on op�ons for a distressed bank and the provision of Chairman, Board of Directors
financial support with due safeguards; thus giving Deposit Protec�on Corpora�on
wider op�ons and possibili�es for smooth resolu�on of
the bank.
It is comfor�ng to note that all scheduled banks operat-
ing in the country are members of DPC. As of June
2023, out of PKR 25.6 trillion deposits of the member
banks, around PKR 14 trillion, or 55 percent of the total
deposits in terms of value are eligible for protec�on
under deposit protec�on scheme of the DPC. In terms
03 Annual Report 2022-23
Message from
Managing Director
I
am pleased to present the third annual report of the
Deposit Protec�on Corpora�on (DPC). It is our fi�h
year of journey towards the paramount mission of
protec�ng depositors’ funds, maintaining public
confidence in the banking system and contribu�ng
towards financial stability. The DPC has emerged as a
deposit insurer that offers, for the first �me, a formal
and explicit protec�on to more than 70 million deposi-
tors of banking system in Pakistan and thus strives to
prevent systemic risk and ensure finan--
cial stability.
It is important to highlight that the DPC has
DPC con�nues to muster its financial
robustness with a healthy deposit crossed the PKR
protec�on fund. Our financial state-
ments show consistent and sustain- 100 billion
mark of invest-
able profitability over the years. The
Corpora�on has been prudently man-
aging its premium receipts, ensuring
availability of op�mum resources
needed to fulfill its core mandate of
ment por�olio.
compensa�ng depositors in case of
failure of any member bank.
In terms of risk management, DPC has implemented
rigorous risk assessment and mi�ga�on processes. It
con�nuously monitors the exposure to various econom-
ic and financial risks, including market vola�lity and
credit risk. Our diversified investment por�olio and strin-
gent risk management prac�ces have contributed to our
financial soundness. I am delighted to share that by the
end of June 2023, DPC has crossed the PKR 100 billion
mark of investment por�olio. Compared to the last year,
there has been a strong improvement in the financial
posi�on. For instance, total investments increased by 47
percent, the income from investments was up by 148
percent while the net profit for the year surged by 44
percent. As a result, the net assets swelled to PKR 100.1
billion in 2023 from PKR 67.8 billion in the previous year.
While the failure of any deposit taking ins�tu�on may
be distressing for its depositors in general, its ripple
effects could extend far beyond its immediate stake-
holders. In such failures, the hardest hit are the small
and financially unsophis�cated depositors, who usually
remain unaware of the risks involved in maintaining
accounts with such banks. During these stressed
circumstances, the DPC serves as an immediate relief to
the depositors by compensa�ng them in an unlikely
event of their bank being declared as a failed ins�tu�on.
To assure the public of the safety of their bank deposits
in such rare situa�ons and the DPC’s capacity to honor
its obliga�ons under the law, it will be encouraging to
note that the Corpora�on has
un�l now paid more than 90
percent of the protected
deposits of the SME Bank
which has been wound
down with the approval of
Government of Pakistan
and declared failed by the
SBP in terms of Sec�on 21
of the DPC Act.
The Corpora�on also aims
to ensure that the deposit
protec�on scheme remains
in line with interna�onal
best prac�ces. Since it became a full-fledged member
of the Interna�onal Associa�on of Deposit Insurers
(IADI), the DPC has sought Peer Assistance in collabora-
�on with IADI from different deposit protec�on agen-
cies to improve the knowledge base and capacity of its
officials. This year, the Corpora�on has also ini�ated a
self-assessment exercise to gauge the level of compli-
ance with the IADI’s Core Principles for Effec�ve Depos-
it Insurance Systems. Incidentally, these principles
relate to key features of deposit insurance systems such
as deposit coverage, funding and governance, prompt
payout, and crisis preparedness and management. The
assessment is s�ll in progress. Once completed, the
outcome would be shared with the stakeholders
Moreover, the DPC has achieved a variety of notewor-
thy policy-related and opera�onal milestones during
this year. One of the significant developments was
formula�on of the Strategic Plan of the Corpora�on for
FY 2023-28. The Plan iden�fies six strategic goals
including strengthening the deposit protec�on frame-
Message from Managing Director 04
work, strategizing developments to enhance Corpora-
�on‘s efficiency and effec�veness, strengthening
region of the country, the DPC also plans to engage
academia for conduc�ng awareness sessions for the
inter-agency coopera�on with other safety-net par�ci-
pants, securing adequate financing sources, enhancing
young genera�on to understand the concept of deposit
protec�on.
the mandate and powers of DPC to boost its role in
ensuring financial stability and to enhance public Internally, the DPC, for the first �me, prepared and
awareness on an ongoing basis. issued a Code of Ethics (CoE) for its employees in com-
pliance with the IADI’s guiding Core Principles for Effec-
It is also important to note that DPC not only protects �ve Deposit Insurance Systems. Incidentally, the CoE is
eligible deposits but also ensure that the public remains a compact set of instruc�ons that provides guidance on
well-informed about the safeguards in place. Towards the standards of professional ethics for the staff and
depositors’ educa�on, the DPC is commi�ed to provid- officials of the DPC. The purpose of this Code is to
ing accessible and easy-to-understand informa�on uphold high standards of integrity, accountability, trans-
about deposit protec�on. We have developed informa- parency, confiden�ality, and impar�ality among
�ve brochures, frequently asked ques�ons, and digital employees of the Corpora�on.
content that explains in plain language the design and
working of the deposit protec�on framework. This
informa�ve material is accessible through
I would like to emphasize that the DPC remains finan-
cially robust and commi�ed to its mission of safeguard-
websites of the DPC and all commercial
banks, besides, brochures are avail-
ing depositors’ funds. With this note, I would like to
extend my thanks to the Governor, State Bank of
able in the bank branches. Keeping in
view the significance of public aware-
Pakistan, for his unremi�ng patronage, and to DPC’s
Board and Shariah Advisory Committee for their
ness, the DPC has also set a strategic direc�on to the Corpora�on. I would espe-
strategic goal in its cially like to express my gra�tude to Ms. Sima
Strategic
2023-28 to expand
Plan Kamil, Ex-Chairperson of the Board, who has
completed her term just before the issuance
its presence and of this report. I would also like to extend my
outreach through hear�elt welcome to Dr. Inayat Hussain, the
various informa�on new Chairman of the Board, whose experi-
channels for ence and vision will undoubtedly lead us
educa�ng the to achieve further excellence and
general public on discharge statutory func�ons in an
the ma�ers relat- efficient manner. While conclud-
ing to deposit ing, let me pay my sincere thanks
protec�on. In to all key stakeholders and, of
addi�on to regu- course, to the DPC team.
lar face-to-face
awareness Muhammad Akmal
sessions with Managing Director
bankers, which Deposit Protec�on Corpora�on
are being carried
out in every
 05 Annual Report 2022-23 Governance Structure 06
Governance Structure

Organogram of Deposit Protec�on Corpora�on

DPC’s Board of Directors
Board of Directors

Managing Director

Corporate IMU & Shariah

Secretariat Compliance

Internal Audit

Policy & Finance & ERM

Operations Investments
Regulations Accounts

Policy & Finance & Risk Assessment

Public Relations Front Office
Regulations Accounts & Reporting

Monitoring & Premium Invoicing Treasury -

Evaluation & Laision Back Office

Waqf & Reimbursment & Ms. Amna Shabbir (Director - BoD), Dr. Inayat Hussain (Chairman), Mr. Muhammad Akmal (Managing Director)
IT & MIS
Sharia Policy Resolution Funding

Legal Matters &

Resolution Support HR & Admin

Digital Initiatives
 CANADA

07 Annual Report 2022-23 Governance Structure 08

Mr. Muhammad Akmal
Managing Director
Board of Directors Mr. Muhammad Akmal, the current Managing Director of the Deposit Protec�on Corpora�on, boasts a
wealth of experience as a central banker with a remarkable three-decade-long career in the banking sector.
He embarked on his professional journey at the State Bank of Pakistan (SBP) back in 1991.

Prior to his present role, Mr. Akmal held various pivotal posi�ons at SBP, primarily focusing on foreign
exchange regula�on, banking regula�on, conduct and supervision.

His impressive skill set encompasses a wide array of competencies, including exper�se in banking inspec-
�on, formula�on and execu�on of Foreign Exchange Policy, Consumer Protec�on & Banking Conduct,
formula�on and implementa�on of Strategic and Business Plans.

Beyond his banking career, Mr. Akmal's influence extends into broader financial spheres. He has served as
the Co-Chairman of the Na�onal Financial Inclusion Strategy (NFIS) Technical Commi�ee, par�cularly in the
domain of ‘Financial Literacy & Consumer Protec�on’. Addi�onally, he has acted as the Business Con�nuity
Planning (BCP) Coordinator for SBP and its subsidiaries. He has also represented Pakistan as the Country
Coordinator for the Asian Clearing Union, focusing specifically on import & export ma�ers. He has further
contributed his exper�se as a member of the Grievance Redressal Commi�ee under PPRA, as well as various
commi�ees within SBP.

Mr. Akmal's unwavering dedica�on to professional growth is evident through his ac�ve par�cipa�on in
numerous local and interna�onal training and a�achment programs organized by central banks, the IMF,
and the World Bank. He has also displayed a strong commitment to capacity building by conduc�ng a variety
of training programs, both for SBP and the broader banking industry. Notably, he has served as a resource
person, impar�ng his knowledge and exper�se in training programs at esteemed ins�tu�ons such as the
Ms. Amna Shabbir Mr. Muhammad Akmal Foreign Services Academy, Government of Pakistan, Na�onal Accountability Bureau (NAB), Federal Inves�-
Director - BoD Managing Director ga�on Agency (FIA), trade bodies/chambers, and the Na�onal Ins�tute of Banking & Finance (NIBAF). He
Dr. Inayat Hussain also shares his experience in the vital discussions on current issues, trends and challenges for central
Chairman bankers on the global pla�orm of The Central Banking

Dr. Inayat Hussain

Chairman
Dr. Inayat Hussain has been appointed as the Chairman of the Board of Deposit Protec�on Corpora�on (DPC)
on September 14, 2023 by State Bank of Pakistan (SBP) under Sec�on 11 of DPC Act 2016. He is also serving as
the Deputy Governor of SBP since November 2021.
Dr. Hussain has diversified experience that spanned over two decades in Central Banking including Banking
Policy, Banking Supervision, Financial Markets & Reserve Management and Islamic Finance. He is a member of
the Monetary Policy Commi�ee of SBP and Policy Board of Securi�es & Exchange Commission of Pakistan. He
also serves as a member on the Council of Ins�tute of Bankers Pakistan (IBP) and as a director on the board of
Na�onal Ins�tute of Banking & Finance (NIBAF).
Dr. Hussain holds a doctorate degree in Economics and Finance from Cur�n University, Australia. He is a
member of CFA Ins�tute, a fellow member of Ins�tute of Cost and Management Accountants in Pakistan and
IBP. He also holds FRM designa�on and an MBA degree in Finance.
Ms. Amna Shabbir
Director - BoD
A BS 19 officer CSS 37th batch. Currently serving as Deputy Secretary Ɓanking which is one of the most
pivotal posi�ons In Ministry of Finance. Her name is recorded on the Honor Board of Finance Division for
Outstanding Performance.
She is a gold medalist in communica�on studies from the pres�geous Kinnaird College and an Alumnus of
Ecole Na�onal De Administra�on Paris France.
She topped her mid career management course. She is invited to top notch training ins�tutes of the Govt
to mentor officers under training. Till date she has trained more than 3000 govt officers with outstanding
feedback.
09 Annual Report 2022-23

Team DPC

Si�ng from le� to right:

Ms. Noreela A�a (Assistant Director), Mr. Khurram I�ikhar (Head, Finance & Accounts), Mr. Muhammad Akmal (Managing Director),
Mr. Mansoor Zaidi, (Head, Policy & Regula�ons), Mr. Sohail Dilawar (Head, Opera�ons) and Ms. Rubana Rashid (Assistant Director)

Standing from le� to right:

Mr. Shahid Abbas (Joint Director), Syed Ali Zubair Manzar (Joint Director), Mr. Shafqat Hameed (Joint Director),
Mr. Abdul Tawab Ayub (Assistant Director), Mr. Afaaq Alam (Deputy Director), Mr. Muhammad Khan Khoso (Joint Director),
Mr. Zeeshan Suleman (Joint Director), Syed Turab Ali (Joint Director), Ms. Khudija Syed (Assistant Director)
 10 Annual Report 2022-23 Promo�ng Financial Stability through Deposit Insurance 11
Promoting Financial Stability through
Deposit Insurance – Mandate and
Objectives of DPC compensate the protected depositors in case a bank is
declared as a ‘failed ins�tu�on’ by the State Bank of
3. Depositors’ Informa�on: In order to ensure prompt
payout to the depositors, it is impera�ve that a compre-
Pakistan.3 The core responsibility of the Corpora�on is hensive and reliable depositors’ database should be at

B
anks play a leading role in the intermedia�on
process in any economy; as they mobilize savings
of their depositors and provide credit to different
agents for undertaking various economic ac�vi-
�es. Therefore, in this inherently risky business, the
protec�on of common depositors and preserva�on of
general public’s confidence in the banking system are
crucial for the financial stability and sustainable
economic growth.
Usually, a large number of bank depositors lack financial
sophis�ca�on, have li�le mo�va�on to assess banks’
risks due to the small-�cket size of their deposits and
o�en place their deposits based on convenience and
trust. On the other hand, the large depositors such as
ins�tu�ons and high net-worth individuals, though much
smaller in number, hold big-�cket deposits that usually
make up the larger chunk in the total deposit mix of
banks1 . These depositors have the capacity to assess the
risks in their investment ventures and are thus consid-
ered more responsible for their financial decisions.
A Deposit Insurance Scheme (DIS), inherently, seeks to
provide limited scope and coverage rather than a blan-
ket guarantee to all the depositors, as these limita�ons
tend to diminish the risks of moral hazard, promote
market discipline and ins�ll more considerate decision
making in depositors. The theme of limited coverage
and scope of deposit insurance is to provide coverage to
a large majority of depositors, but leaves a substan�al
part of deposits unprotected or par�ally protected.
The ul�mate protec�on of the depositors’ interest is
linked to a robust and well-func�oning financial system
which is ensured by a series of interlinked arrangements
by the financial supervisors and central banks in their
respec�ve jurisdic�ons. A DIS is not the first and only
resort to safeguard depositors’ interests; in fact, it is the
final remedy in the series of Financial Safety Net (FSN)
arrangements. These arrangements, which act as the
first line of defense against the failure of a bank include
pruden�al regula�ons, capital and liquidity require-
ments to build adequate financial cushions [CAR and
Leverage Ra�o], cash and liquidity reserve requirements
[CRR and SLR] and Liquidity Coverage Ra�o (LCR).
Besides, a comprehensive supervisory framework is put
in place to proac�vely monitor both idiosyncra�c and
systemic risks faced by the banks and to take �mely
correc�ve ac�ons for redressing any supervisory
concerns. In order to assist the banks to weather any
interim financial strains, Emergency Liquidity Assistance
(ELA) or the Lender of the Last Resort (LoLR) facili�es are
provided to banks. Even beyond these arrangements, if
the failure of a bank becomes unavoidable, then the
resolu�on tools can also be used for orderly resolu�on
of distressed bank in such a manner that ensures best
possible protec�on to depositors as well as overall
financial stability.
Based on the above concepts, the responsibility to
provide deposit insurance in Pakistan has been entrust-
ed to the Deposit Protec�on Corpora�on (DPC). Under
the DPC Act 2016, the Corpora�on is mandated to oper-
ate as ‘Pay-Box Only’ 2, signifying its responsibility to
to make the funds available to the depositors at a very hand. On the advice of the Corpora�on, this informa-
short no�ce, so that they do not face financial distress �on setup has been developed by all the member
due to failure of their bank and the trust of the general banks of the Corpora�on.
public and the depositors in the financial system
remains intact. 4. Public Informa�on: The Corpora�on endeavors to
maximize its outreach to the depositors to educate
The framework for reimbursement to the depositors is them about the concept of deposit insurance and give
based on the following significant pillars: them the confidence in the financial system.
1. Sufficiency of Funds: The Corpora�on collects the This year, the Corpora�on has completed its five years
premium and maintains separate pools of funds for of opera�ons and achieved many milestones; however,
Islamic and Conven�onal banking depositors. In addi- much more remains to be done. The Corpora�on is
�on to that, the Corpora�on has legal op�ons to gener- looking forward to enhance its mandate by taking up
ate addi�onal funds for mee�ng any funding needs in the role of ‘Pay-Box Plus’ and assist the resolu�on
case there is any shor�all of funds to carry out payout authority in effec�vely implemen�ng its resolu�on
process. scheme in case a bank becomes unviable. Thus, the role
of the Corpora�on would be enhanced as a cri�cal
2. Coverage of Deposits: Under the current deposit financial safety net par�cipant.
protec�on mechanism, 98 percent of all the depositors
of member banks are eligible for coverage by the
Corpora�on. The coverage provided to such depositors
was PKR 250,000 per depositor per bank at the �me of
incep�on of the Corpora�on (Jun-2018), which was
increased to PKR 500,000 in Sep-2021. This amount is
sufficient to fully cover 94 percent of total depositors;
while the remaining 4 percent will be par�ally covered
by DPC; however, their addi�onal balances may also be
protected through other measures such as resolu�on
or liquida�on proceeds.

1 Case in point – In our banking system, around 94% of total depositors carry deposits up to Rs. 500,000, while the 3The Corpora�on’s mandate is to payout to depositors only in case SBP declares a bank as a failed bank, any losses
rest, only 6% go beyond that figure. Further, around 83% of total depositors carry deposits up to Rs. 50,000 in their to depositors due to the�, fraud or any other kind of scam are not covered by DPC. In such case depositors are
accounts. advised to contact the relevant forum.
2 There are four types of mandates under which DIS operate around the globe; ‘Pay-Box only’ being the basic one
is the first step. The ‘Pay-Box Plus’ is the next step with added func�ons to provide financial support in the resolu-
�on of a bank or FIs. Under the ‘Loss Minimizer’ mandate, the DIS operates as a Resolu�on Authority in addi�on
to first two mandates. Finally, the ‘Risk Minimizer’ mandate gives power to the DIS to operate with risk assessment
and some supervisory powers added to all three func�onali�es men�oned earlier.
 12 Annual Report 2022-23
Reimbursement to the Eligible
Depositors of SME Bank
I
n the business of financial intermedia�on, the trust
of depositors is vital that hinges upon the stability of
the banking sector. Therefore, one of the primary
objec�ves of any banking supervisor and other finan-
cial safety net partners is to keep depositors’ faith in the
banking system intact.
Recently, owing to insufficient capital and liquidity, the
Federal Government approved a winding down plan for
the SME Bank as proposed by the State Bank of Pakistan
(SBP) to ensure that no depositor is adversely affected
by the closure of the bank. In terms of SBP’s proposed
plan, payout to all the depositors of SME Bank was
ini�ated on priority basis in order to maintain deposi-
tors’ confidence in the banking system. The SBP also
issued a no�fica�on in this regard on May 10th, 2023
declaring SME Bank as a failed ins�tu�on in accordance
with Sec�on 21(1) (a) of the Deposit Protec�on Corpo-
ra�on Act, 2016, effec�ve from March 27, 2023. Conse-
quently, the DPC also made a public announcement
informing eligible depositors of SME Bank to approach
the bank for receiving their due balances.
Therea�er, DPC commenced periodic reimbursements
to SME Bank against its payouts to the eligible deposi-
tors up to the protected amount in accordance with the
Single Depositor View (SDV) database provided by SME
Bank. The SDV database played a crucial role in deter-
mining eligibility and payment of the total liability of the
SME Bank toward its depositors. Due to availability of
SDV database, the turn-around-�me for reimbursing
eligible depositors has been shortened. The payouts are
made on the basis of claims received from SME Bank i.e.
as and when a customer approaches the bank for with-
drawal, the outstanding balance in his/her account is
paid out by SME Bank and the protected deposit
amount i.e., up to PKR 500,000, is claimed from DPC
which is subsequently reimbursed to SME Bank a�er
due verifica�on.
While the failure of a small bank can be distressing for
its depositors, the presence of an efficient and
well-func�oning deposit insurance serves as a financial
safety net. A me�culous planning, quick ac�on, and
�mely and clear communica�on by stakeholders, includ-
ing DPC, play a pivotal role in ensuring the stability and
integrity of the banking system. Nonetheless, there are
challenges in the process that require ongoing adapta-
�on, especially in a world of ever-evolving financial
products and economic condi�ons.
The efficient payment and reimbursement to protected
depositors of SME Bank can be quoted as a test case in
safeguarding both the interests of the individual deposi-
tor and the broader financial system.
 14 Annual Report 2022-23
Expanding the Scope of Coverage to Digital &
Microfinance Banks under DPC’s Safety Net
T A
he banking industry is going through a revolu�on
with the technological innova�ons in financial
services. The use of latest informa�on and digital
technologies has the poten�al to become a
remarkable tool for broadening the financial inclusion,
facilita�ng the transac�on flow and reducing the
excessive dependency on hard cash. The usage of
technology can transform the very nature of how the
business of financial services will be carried out in
future. Considering these dynamics, the State Bank of
Pakistan (SBP) has taken �mely measures to enhance
the digital technology footprint in the financial sector
by issuing various enabling regula�ons and pu�ng in
place infrastructure that facilitate the tech-based
financial services.
In the same spirit, SBP has lately issued Licensing and
Regulatory Framework for Digital Banks. The objec�ve
of the Framework is to provide a conducive regulatory
environment for digital banks with a strong value propo-
si�on, robust technological infrastructure, sufficient
financial strength, technical exper�se, and an effec�ve
risk management culture.
As the digital banks are expected to promote financial
inclusion by providing affordable financial services to
unserved and underserved segments of society - along-
side fostering a new set of customer experience - it is
crucial that the digital banks be included in the ambit of
deposit protec�on mechanism. Digital banks, once
opera�onal, shall become members of the DPC as per
the relevant laws. Accordingly, the poten�al depositors
of the digital banks would also fall under the umbrella of
DPC’s Deposit Protec�on Scheme.
lthough a rela�vely small segment, the Micro-Fi-
nance Banks (MFBs) also play a pivotal role in
promo�ng financial inclusion and poverty allevia-
�on, par�cularly in the developing economies.
These ins�tu�ons promote financial inclusion by provid-
ing various financial services including credit, savings,
and payment systems to underserved and marginalized
popula�on who are o�en excluded from tradi�onal
banking services.
Eleven MFBs are currently serving 98.2 million deposi-
tors with a deposit base of around PKR 520 billion as of
Jun-2023. Considering the fact that these ins�tu�ons
cater to majority of financially unsophis�cated segment
of society, a failure of any of these ins�tu�ons may
create considerable ripples and disrupt socio-economic
fabric of wider popula�on. Therefore, an explicit and
limited protec�on is needed for these depositors.
Although, a deposit protec�on mechanism already
exists under the MFI Ordinance 2001, whereby each
MFB is required to create its own depositor protec�on
fund from its annual profits, however, there is a need to
provide a be�er and more reliable safeguard mecha-
nism for the depositors of MFBs. The DPC may provide
an independent, credible and robust mechanism as a
crucial safeguard for depositors of MFBs that would not
rely on the profitability of the ins�tu�ons. By extending
DPC’s coverage, the financial security of these marginal-
ized groups can be for�fied, ensuring that their
hard-earned funds are safe from poten�al risks. The
Corpora�on has proposed appropriate changes in its
statute that would enhance its scope and require MFBs
to become compulsory members of DPC, enabling it to
provide coverage to their depositors. The coverage
arrangement for depositors of MFBs will go a long way
in making our financial system more robust and will
further enhance the public’s trust on the stability of the
domes�c financial system.
16 Annual Report 2022-23 Know the Deposit Protec�on Scheme 17

Know
the deposit protec�on scheme
about deposit protec�on, collabora�ve efforts with
member ins�tu�ons have been undertaken to ensure
regular and consistent messaging to depositors via
SMS and emails, incorpora�ng deposit insurance
informa�on in banks' customer communica�ons.
Promo�ng transparency and accessibility: The DPC
aims to enhance transparency by making informa�on
about its opera�ons and financial health and reim-
bursement framework easily accessible to the public.
This would help foster trust and confidence among
Endeavors towards Public Awareness depositors and general public. To a�ain this objec�ve,
To further inform the public on deposit protec�on DPC has made its website easily accessible entailing
mechanism, the DPC has also prescribed informa�on maximum informa�on for public.
In Engaging with Member Ins�tu�ons: brochure / flyer to all commercial banks to make these
terms Considering the fact that commer- available in their offices and branches. This is Corpora�on’s third report for the year 2022-23.
of the cial banks’ branch network and DPC’s first and second annual reports were well
Deposit Protec�on Act 2016, regions are the first line of commu- Targe�ng specific groups: The DPC has iden�fied received. In addi�on to dissemina�on of these reports
one of the core func�ons of nica�on with general public and specific groups, such as university students, who may through all available modes of communica�on, Corpo-
Deposit Protec�on Corpora�on depositors, DPC con�nues to engage have limited knowledge about bank accounts and ra�on arranged to distribute nearly a thousand hard
(DPC) is to create awareness with all member banks by means of deposit protec�on but are poten�ally great source of copies of the reports to all the banks and to the busi-
among general public and the online and face to face awareness onward public awareness and confidence. A special ness ins�tutes, including all the universi�es and librar-
depositors about the deposit sessions at all regions in the country. outreach program is being developed to ensure that ies across the country, to ensure its wider readership
protec�on scheme. To This has significantly improved the aware- these groups receive adequate informa�on and with a view to enhancing awareness of different
perform this func�on, all ness about deposit protec�on among the regional and remain aware of the deposit protec�on available to groups on deposit protec�on mechanism.
internal & external stake- branch staff of the banks and ul�mately their custom- them and the deposits of their families and communi-
holders, par�cularly the general ers. �es.
public, depositors, member ins�tu-
�ons (banks) should be kept informed This year alone, DPC has held face to face sessions at
about the explicit deposit protec�on scheme of three regions namely Bahawalpur, Multan and Hyder-
DPC on an ongoing basis. abad.

Keeping in view the significance of public awareness, To disseminate infor-

DPC has reset a paramount strategic goal in its Strate- ma�on to all eligible
gic Plan 2023-28 to put in concerted efforts in order to d e p o s i t o rs
expand its presence and outreach through all available
informa�on channels to educate general public on the
ma�ers rela�ng to deposit protec�on. This strategic
goal is to ensure that the general public has a clear
understanding of the concept of deposit protec�on
system and the role of the DPC in protec�ng their
deposits. This would help build their confidence in the
financial system and promote stability by reassuring
depositors regarding safety of their deposits to the
extent of a protected limit. Some of the key approach-
es that DPC has harnessed upon to expand awareness
under this strategic goal are engaging with member
ins�tu�ons, targe�ng specific groups and promo�ng
transparencyand accessibility.
18 Annual Report 2022-23
Deposit Protection
MECHANISM
in P A K I S T A N
5 4
1
Know the Deposit Protec�on Scheme 19
Guarantee Amount
A protected amount of up to PKR 500,000/-
per depositor per bank has been
determined by DPC for the protec�on of
eligible depositors.
1 2 Covered Accounts
-All current and saving accounts
-All branchless banking accounts
-Call deposits receipts / accounts, security
-Deposit reciepts / security deposit reciepts
-Deposit kept as cash margin / cash
collateral under lien
-Foreign currency accounts
-Profit accrued on all of the above accounts
2
3 Member Banks
All scheduled banks opera�ng in Pakistan are
members of DPC
4
Islamic & Conven�onal Protec�on
Eligible depositors of both Islamic and
conven�onal banks are protected.
5
Prompt Reimbursement
Payment to the depositors within 7 to 30
working days.
20 Annual Report 2022-23 Know the Deposit Protec�on Scheme 21
Know
the deposit protec�on scheme
How do I know if my bank is a member
bank of DPC or Not?
Endeavors towards Public Awareness Presently all scheduled banks opera�ng in Pakistan
are members of DPC. This list is also available at
DPC’s website: h�p://www.dpc.org.pk/Circu-
lars/2020/CL1-Annex-A.pdf
What is Deposit Protec�on?
Deposit Protec�on is a system established to
protect the deposits of eligible depositors up
to a specified limit in the event of a bank
being declared as a failed bank by State Bank
of Pakistan (SBP).

JOINT ACCOUNT
protec�on
I have a joint account with my partner in a
bank. Does each of us enjoy separate
deposit protec�on by DPC in case of bank
Per depositor per bank

Protected Amount
What is the protected amount failure?

Protec�on

determined by DPC for the protec-
�on of eligible depositors?
Presently, a protected amount of up to PKR
500,000/- per depositor per bank has been
Upto PKR
Protec�on
Yes, each eligible depositor of a joint account enjoys
separate protec�on by DPC. However, any pre-de-
fined share or propor�onate share of each depositor
UPTO PKR
500,000
UPTO PKR
500,000 in a joint account shall add up to his/ her other
In accordance with available account balance deposit balances in the same bank for the purpose of

500,000
determined by DPC for the protec�on of whichever is less calcula�ng the protected amount for reimbursement
eligible depositors. to that depositor.
22 Annual Report 2022-23 Know the Deposit Protec�on Scheme 23
Calcula�on of Protected Amount - How DPC would assess the protected amount for different categories
Two accounts in the same bank of eligible depositors?

I have two accounts in the same bank, one as an individual and other as a The protected amount would be assessed against all deposits of a single depositor held with a failed
bank on the date of no�fica�on by the State Bank of Pakistan.
Sole Proprietor. Does DPC provide separate protec�on to both accounts
at the �me of bank failure? The following table clarifies the process of evalua�ng guaranteed amount for different categories of
depositors:
DPC does not provide separate protec�on to persons having accounts as an individual and a Sole
Proprietor in the same bank. The calcula�on of protected amount for such depositors is depict-
ed below:

No of Acounts Total Deposits Protected

Depositors Category in same bank (PKR) Amount (PKR)

Individual & 3
No of Deposits Mr. XYZ Khan Sole Proprietor
600,000 500,000
CATEGORY Accounts (PKR)
Individual 1 200,000/- 1 300,000 300,000
Ms. ABC Bibi Individual

Mr. RAZ Sole Proprietor 4 1,000,000 500,000

Protected Amount
Total Deposits

500,000
540,000/- ABC Consultancy Ltd Partnership Firm 2 700,000 500,000

WBC Builders Partnership Firm 3 1,500,000 500,000

MNP Fitness Club Sole Proprietor 6 1,000,000 500,000

No of Deposits Trust 200,000 200,000

CATEGORY Accounts (PKR) SINCOS Founda�on 1

Sole Proprietor 1 340,000/-

Other
TANG-ONN ( Adventure Club) 1 100,000 100,000
 24 Annual Report 2022-23
Capacity Building
Crisis Simula�on Exercises
The bank resolu�on regime in Pakistan is being further
strengthened by inclusion of addi�onal triggers,
powers, and tools, making it crucial for SBP and DPC to
equip their teams with the necessary skills to confident-
ly navigate through any financial crisis. In this regard,
SBP has undertaken a proac�ve approach to establish
policies that aim to iden�fy and mi�gate various crisis
scenarios. However, these policies and procedures
need to be tested to assess their relevance and effec-
�veness through simula�on exercises replica�ng the
crises. These exercises serve as a litmus test for crisis
management capabili�es, enabling recalibra�on and
refinement based on outcomes.
Simula�ng financial crises involves a comprehensive
assessment of preparedness and robustness of the
financial safety net in the face of poten�al crises, par�c-
ularly the ins�tu�ons with systemic implica�ons.
In pursuit of this objec�ve, SBP conducted a couple of
simula�on exercises during the year to assess the effica-
cy of its crisis management plans and procedures that
are currently in place. As a financial safety net partner,
team DPC also par�cipated ac�vely in these simula�on
exercises, which also provided a valuable pla�orm to
learn and contribute to the planning and execu�on of
crisis management strategies. These exercises not only
tested the relevance and efficacy of the various design
features of its deposit protec�on mechanism but also
highlighted the significance of the evolving role of DPC
in suppor�ng bank resolu�on, in addi�on to reimburs-
ing the depositors of failed member ins�tu�ons.
The ini�al exercise, facilitated by the Toronto Centre,
unfolded in two dis�nct phases: the capacity-building
stage, in which par�cipants were briefed with the theo-
re�cal underpinnings of resolu�on and bank failure
management prac�ces, followed by well-designed
hypothe�cal crisis scenarios. Teams from SBP and DPC
were required to respond to stress scenarios involving
macroeconomic challenges and various small and
systemic bank failures.
The second simula�on exercise was conducted by the
World Bank, to assess the prac�cal readiness of the
established bank resolu�on mechanisms. This simula-
�on enlisted the collabora�ve efforts of the SBP, DPC,
and SBP-BSC teams in addressing a systemic crisis
scenario.
a) Course on Financial Crisis Management from
Toronto Centre
Teams from SBP and DPC par�cipated in the crisis simu-
la�on exercise facilitated by the Toronto Centre (TC),
scheduled from 29th November to 8th December 2022.
It was an extensive 8-day demonstra�on; comprising
presenta�ons, group ac�vi�es, panel discussions, and
simula�on exercises. The TC provided a standardized
simula�on exercise covering the roles of the Superviso-
ry Authority, Resolu�on Authority, Central Bank, Depos-
it Insurance Agency, and cross-border linkages.
The simula�on was designed around the scenario of
successive bank failures in a very short span. In this
hypothe�cal se�ng the responsible authori�es were
tasked to grant Emergency Liquidity Assistance (ELA),
use Deposit Insurance Fund (DIF), conduct systemic
assessments, and engage in cross-border arrange-
ments.
The par�cipants were required to propose workable
resolu�on op�ons for small, systemic, and banks with
cross-border linkages. For the simula�on exercise,
par�cipants were divided into two groups, and each
group was further bifurcated into a central bank and
supervisory teams. The central bank teams within both
groups had the responsibility to conduct comprehen-
sive assessments of the systemic impact emana�ng
from the failing member ins�tu�ons and enac�ng deci-
sions of the alloca�on of central bank instruments,
based on the systemic assessments of member ins�tu-
�ons. On the other hand, the supervisory teams of
each group carried out supervisory evalua�ons of the
member ins�tu�ons, made cri�cal resolu�on decisions
about the failing member ins�tu�ons, cross-border
coordina�on on resolu�on decision-making and man-
aged deposit insurance arrangements.
b) Custom-built Crisis Simula�on Exercise by the
World Bank
The State Bank of Pakistan conducted another finan-
cial Crisis Simula�on Exercise [CSE] under the guid-
ance of the World Bank in March 2023. This exercise
was based on customized scenarios relevant to the
dynamics and regulatory framework of Pakistan’s
exis�ng banking industry. The exercise was a full-day
event and involved par�cipants from SBP and DPC. At
its core, the CSE was aimed to assess the deci-
sion-making, coordina�on, and seamless communica-
�on amongst the supervisory and resolu�on authori-
�es and deposit insurer in a rapidly escala�ng crisis in
the context of systemic bank failure.
This exercise was designed to test primarily the effects
of coordina�on framework on decision-making,
mechanism of informa�on sharing amongst the
players, assessment of systemic risks and above all
managing external
communica�on and
handle the press.
Throughout the
simula�on exercise,
par�cipants were
exposed to variety
of challenges and
immersed into com-
plex decisions
making, enabling them to propose a con�nu-
um of resolu�on alterna�ves for varying
types of banks, encompassing small ins�tu-
�ons, systemic banks, and those intercon-
nected across borders.
This simula�on exercise marked a significant a�empt
at improving preparedness and refining the crisis
management framework for both teams from SBP &
DPC. It dipped par�cipants in a dynamic environment,
fostering collabora�on between central bank and
supervisory teams and equipping them to adeptly
steer mul�faceted crisis scenarios.
Peer Assistance Sessions with Bankowy Fundusz
Gwarancyjny (BFG) - Poland
In view of the enhancement of the Corpora�on's man-
Capacity Building 25
date from "pay-box" only to "pay-box plus", DPC
engaged in online Peer Assistance (PA) sessions with
the Bank Guarantee Fund (BFG), Poland. The collabo-
ra�ve sessions were carried out in November 2022
and were facilitated by the Training and Capacity
Building Unit (TCBU) of the Interna�onal Associa�on
of Deposit Insurers (IADI).
The sessions delved into fundamental areas of
acquain�ng par�cipants with the concepts and the
dynamics of interac�on with the resolu�on authority
in the backdrop of bank resolu�on. Team BFG provid-
ed comprehensive insights into their resolu�on plan-
ning strategies, fund alloca�on, and arrangement in
bank resolu�on.
The areas covered under this assistance program
were:
• Legal Framework and General understanding of
Resolu�on Planning
• Trigger Points for Bank Resolu�on,
marking instances when the resolu�on
authority inter-
venes to resolve
a failing member
ins�tu�on;
• The set of tools
available for bank
resolu�on
and challenges in
resolving a
non-viable ins�tu�on;
• The Role of Deposit Guarantee Fund in Depositor
Reimbursement and Bank Resolu�on;
• The prerequisites and condi�ons governing the
u�liza�on of the resolu�on fund.
These insigh�ul PA sessions not only expanded the
understanding of DPC team members of the cri�cal
aspects of bank resolu�on but also contributed to
traversing towards the enhanced mandate of the
Corpora�on.
26 Annual Report 2022-23

Technical Assistance Session on Bank Resolu�on

Framework with Ins�tuto para la Protección al Ahorro
Bancario (IPAB) - Mexico

With the proposed enhancements, the role and

responsibili�es of SBP as a resolu�on authority is
expected to significantly change in accordance with the
structural amendments proposed in the Banking Com-
panies Ordinance, 1962, and Deposit Protec�on Corpo-
ra�on Act, 2016. These enhancements encompass a
broader array of resolu�on tools and expanded powers
for the SBP.

To further strengthen the SBP team's understanding

and u�liza�on of resolu�on tools, DPC arranged a learn-
ing session with IPAB-Mexico. The primary objec�ve of
this session was to benefit from the experience of
IPAB-Mexico – which operates as a loss minimizer’ in
their jurisdic�on – and delve into the details of resolu-
�on plans, including their contents, the frequency of
development, and the criteria used for selec�ng banks
for such plans.

During the session, par�cipants from the SBP and DPC

teams, and IPAB representa�ves engaged in in-depth
discussions about essen�al aspects of policy formula-
�on, resolu�on planning, and execu�on of resolu�on
ac�ons. Given IPAB's extensive experience in dealing
with numerous bank failures over the years, the SBP
and DPC team was keen on acquiring prac�cal insights
into resolu�on planning and the implementa�on of
various resolu�on tools.
28 Annual Report 2022-23
Deposits, Premium & Coverage
Deposits with DPC Member Banks
Deposits with DPC’s member banks
con�nued to grow in FY 2023 and
jumped to an all-�me high of PKR
25.6 trillion by the end of June 2023.
Correspondingly, the volume of
eligible deposits recorded a net
increase of PKR 1.8 trillion during the
The percentage of eligible depositors in both conven-
�onal and Islamic banking ins�tu�ons shows distribu-
�on of deposits in Pakistan’s banking industry, where
large amounts of deposits are being held by fewer
depositors. Moreover, the number of eligible deposi-
tors considered together with the value of eligible
deposits reflects our standing with the accepted
principle for deposit insurance that call for providing
Total and Eligible Deposits protec�on to the majority of depositor while leaving a
Figure 1 30,000 significant amount of deposits exposed to market
25,000 discipline. This also exhibits the fact that the coverage
20,000 of our deposit protec�on mechanism is more
Deposits, Premium and Coverage 29
Of the eligible deposits, based on data as of June 30,
2023, 13 percent and 10 percent of conven�onal and
Islamic banking deposits, respec�vely are fully
protected. Such depositors have outstanding balances
less than or equal to the coverage amount of up to
PKR 500,000 and maybe reimbursed their full deposits
from DPC in case of bank failure.
In terms of numbers, 95.5 percent of conven�onal
banking eligible depositors are fully protected while
91.9 percent of Islamic banking eligible depositors are
fully protected. The rest of the depositors are also

Billion PKR
same period and stood at PKR 14 centered towards smaller and financially unsophis�- covered up to PKR 500,000, but their outstanding
15,000
trillion by the end of June 2023. How- cated depositors. balances are more than PKR 500,000 (Figure 6 and
10,000
ever, the YoY trend revealed a slow- Figure 7).
down in the pace of deposits mobili- 5,000

za�on during FY 2023 as compared to -

FY 2022. The growth of deposits
Figure 4 
30-Jun-19

30-Jun-20

30-Jun-21

30-Jun-22

30-Jun-23
decelerated to 12 percent during FY
2023 from 15 percent witnessed

Deposits
Ineligible
during the previous year.

The increase in total deposits can be a�ributed to

Total Deposits Eligible Deposits
37%

Islamic Banking Deposits

factors such as the higher rate of return offered in the Figure 1 reflects the trend of Total and Eligible deposits
wake of a �ghter monetary policy stance and the with DPC member banks.
expansion of banks’ branch network. While the decel- Figure 5

era�on of deposit mobiliza�on may be accredited to Eligible and Protected Deposits
macroeconomic uncertainty, including infla�onary As of June 30, 2023, 98.9 percent of total depositors of

Deposits
Ineligible
Eligible Deposits

Conven�onal Banking Deposits

pressures, a slowdown in the inflow of foreign remit-
tances by Pakistani diaspora could be another factor
for the deposit decelera�on.
conven�onal banking and 98.7 percent of total deposi-
tors of Islamic banking are eligible for deposit protec-
�on in case of a bank failure (Figure 2 and 3). While in
48%
terms of value, 52 percent of conven�onal banking and
63 percent of Islamic banking deposits are eligible for
deposit protec�on (Figure 4 and 5). 63%

Eligible Deposits
Conven�onal Banking
Eligible & Ineligible No. of Depositors
Islamic Banking
Eligible & Ineligible No. of Depositors
52%



Figure 2 98.9% 1.1% 98.7% 1.3% Figure 3

Eligible Ineligible Eligible Ineligible

 30 Annual Report 2022-23

 Figure 6 Figure 7 

91.9%
95.5%

Protected Depositors Protected Depositors

Conven�onal Banking Islamic Banking

Premium Collec�on from Member Banks

As the premium charged to banks by DPC is linked to Figure 8


their total eligible deposits, the increase in premium

collec�on directly corresponds to the increase in such Year Wise Premium
FY-2023 4,787
deposits at the member banks. Further, as the conven- 14,213
�onal banking has a lion’s share in the overall deposits, FY-2022 3,953
their propor�onal contribu�on to the premium is much 13,065

larger than those of Islamic Banking Ins�tu�ons (IBIs). FY-2021 3,080

11,602
However, as the growth in Islamic banking is at a higher 2,531
pace than conven�onal banking, the premium collec- FY-2020 10,222
�on from IBIs witnessed higher corresponding increase 2,200
9,335
FY-2019
than the premium collec�on from conven�onal banks
(Figure 8). -
- 5,000 10,000 15,000
Million PKR
Conven�onal Islamic
 32 Annual Report 2022-23 Strategic Plan of DPC 33
Strategic Plan of DPC
"Deposit Protection Corporation: Safeguarding Depositors’ Trust" Strategic Goals Tac�cal Objec�ves
 Assessment of exis�ng deposit protec�on framework in line with Core Principles of
IADI.

B
eing an important cons�tuent of financial safety
net for the depositors of banking sector, the
Deposit Protec�on Corpora�on recognizes that its
strategic direc�on is fundamental to navigate its
way towards its mission.
During the year, the Corpora�on has adopted a five-year
Strategic Plan, spanning over 2023 to 2028. The Plan
sets a roadmap that guides Corpora�on’s ac�ons and
strategies over the period of five years to be�er set
priori�es, commit energy and resources and to direct all
employees’ orienta�on towards common goals.
An appealing tagline, ‘Safeguarding Depositors’ Trust’,
has been adopted through this Strategic Plan to truly
reflect the intent and mandate of the Corpora�on. It
would repose more confidence amongst all stakehold-
ers and would u�er our core mandate in one solid line.
depositors and general public on the country’s banking
system.
All these ac�ons are intrinsic to DPC’s Strategic Plan
2023-28 that are anchored on six strategic goals and
supported by tac�cal objec�ves and numerous ac�on
plans and ini�a�ves.
The Board and Management of the Corpora�on are
commi�ed and keen to implement the Strategic Plan
within specified �melines to achieve the envisioned
strategic outcomes.
Strengthen the Framework
for
Protec�on of Depositors
To Strategize developments for
the Corpora�on in order to
make it more effec�ve and
efficient
Strengthen the interagency
coopera�on with other
safety-net par�cipants
 Evaluate the fixed rate premium calcula�on methodology vis a vis risk based differ
en�al premium rate method.
 Assessment of the ability to respond to the risk of actual bank failures .
 Determina�on of Target fund size and its periodicity of review.
 Develop roadmap and arrangement of required resources for efficient reimbursement.
 Development of reliable payment plans for the efficient compensa�on to the protected
depositors of failed member ins�tu�on(s) .
 Develop Technological Advancements for the bank’s depositors pertaining to their
protected amount informa�on and submission of claims.
 Transform the cri�cal business processes of the Corpora�on to produce more efficacy.
 Implement Enterprise Risk Management Framework in the Corpora�on more effec�vely.
 Development of a framework for coordina�on of ac�vi�es like informa�on sharing,
crises management and resource sharing.

In terms of this plan, DPC requires reliable payment  To ensure sufficiency in Corpora�on’s resources during payout to depositors.
Protected Depositors are
plans for efficient compensa�on to the protected Protected from losses by
depositors, availability of required IT and human ensuring adequate financing
sources
resources, effec�ve inter-agency coopera�on with other
safety net par�cipants and adequate financial resourc-
es.
 Enhancement of the Corpora�on’s mandate to pay-box plus and broadening its
Enhancement of DPC's scope for ensuring financial stability (TO-1)
The enhancement of the mandate of the Corpora�on Mandate and Powers to boost
from “pay box” to “pay box plus” is also under consider- its role in ensuring financial
a�on through appropriate amendments in its statute. stability
The enhanced mandate would require to setup a frame-
work for resolu�on support along-with development of
ancillary policies. Further, the Corpora�on also endeav-  To educate the public about deposit protec�on in order to ins�ll confidence on
Promo�ng Deposit Protec�on banking system
ors to leverage technological and digital advancements Corpora�on as a well-known
to communicate with depositors, payout compensa�on safety-net par�cipant among
to them at the �me of bank failure(s) and transform Depositors and General Public)
cri�cal business processes to produce more efficacy.
The Corpora�on also desires to become a robust
safety-net par�cipant in order to ins�ll confidence in
 34 Annual Report 2022-23 Risk Governance and Management 35
and assessment process as per the assigned responsi- Commi�ee, respec�vely. One of the objec�ves of the
bili�es and tasks. A par�cular exercise with special investment policy is to manage the available funds in a
focus on the strategic risk iden�fica�on and assessment prudent manner while maintaining an equilibrium

Risk
is carried at the management level on periodic basis.
Thus, it is ensured that risks are catered using both
bo�om-up and top-down approaches. Three lines of
defense model is the control system adopted by DPC to
ensure that risks are managed effec�vely as depicted
below;
Governance and Management
DPC BOARD OF DIRECTORS
between returns, liquidity and risks in order to maxi-
mize the fund size. To ensure that DPC takes into
account any material exposure concentra�ons wherev-
er they might arise, limits are set at a number of levels,
such as individual transac�on, investment instru-
ment(s), tenor, counterparty, liquidity in the market
and so on. The Corpora�on’s investment policy s�pu-
lates to mainly invest in securi�es that the Government
issues or guarantees for its Conven�onal and Islamic

01 02 03
funds, so there is zero default risk and investments are
highly liquid.

Line of Defense The financial risk at granular level also stems from the
Core and Support Depts. Line of Defense Line of Defense
ERMD, SBP’s Management
Commi�ee on ERM
Internal Audit,
SBP’s Board Commi�ee
changes in interest rates that expose the Corpora�on to
Own and Manage Risk on ERM
interest rate risk. The Corpora�on’s main source of
interest rate risk is its investment in Pakistan Invest-
Set Standards and Challenge Provide Assurance
Identification,
assessment, monitor Review and approve
and report on risks Monitoring of risks in

ment Bonds and Shariah Based Ijara Sukuks. The man-

line with risk appetite
and risk management
Design and implement
policies
mitigation plans
Integrate with Risk
the Corporation’s risk
management policy
and plan including risk
agement es�mates indicate that for a 100 basis points
appetite statements

D
Support in defining Monitor Compliance
rise/fall in the interest rate, assuming all other factors
key risk indicators framework
implementation with with policies,

Deposit Protec�on Corpora�on (DPC) acknowl- mi�ga�on plans along-with �melines. Ensure that level of strategic and standards guidelines

risks undertaken operational goals of

Set and Monitor the remains constant, the Corpora�on’s revalua�on
edges that establishing a strong enterprise risk should commensurate the Corporation
risk profile of the

account would fall/rise by PKR 628 million.

with the overall Corporation
strategic objectives Provide training, tools,

management func�on is essen�al to keep pace The mandate of the Corpora�on is limited to the advice and support to
the first line Provide independent
assurance on the risk

with evolving dynamics. A proficient risk manage- ‘Pay-box’ under which the Corpora�on is only responsi- management prcoess

Internal Audit at DPC

ment program and a sound system of internal controls
play pivotal role in day-to-day opera�ons and strategic
decision making process. Risk Management drives the
iden�fica�on and implementa�on of strategic and
annual business planning exercises. The Board and Man-
agement ensure that Enterprise Risk Management
(ERM) framework is embedded into DPC’s culture,
processes and structures.
The ERM Framework implemented at DPC is aligned
with the risk management framework of its parent
en�ty, i.e. State Bank of Pakistan (SBP). The Corpora-
�on’s spectrum of risk is organized according to the
classifica�on outlines in the risk library. These risks are
ranked based on their severity and probability, and the
findings are communicated to both the Management
and Board Commi�ees on Enterprise Risk Management
of SBP. Addi�onally, the DPC’s Board is kept abreast of
the risk evalua�on outcomes as well as any sugges�ons
from SBP regarding risk reduc�on strategies. The risk
universe filtered on the basis of residual risk score, risk
appe�te level, risk response and overall risk category is
presented to DPC’s Board through visualiza�on tools like
risk heat map. During the year, the DPC’s Board
reviewed the risk inventory and approved the risk
ble for the reimbursement of protected deposits (i.e. up
to PKR 500,000/- per depositor per bank) in the event of
The Internal Audit is an independent and reliable func-
failure of a member ins�tu�on as no�fied by SBP. At
Each department has the main duty of finding and �on that acts as the third line of defense for the Corpo-
DPC, the Enterprise Risk Management Department
evalua�ng the risks that affect them, while ERMD ra�on and supports its overall risk management struc-
(ERMD), under the guidance of Risk Management Com-
supports them as a second line of defense and ensures ture. The Internal Audit & Compliance Department of
mi�ees, is responsible for designing the risk assessment
that risk management is done properly and consistent- SBP, which has no managerial du�es for the ac�vi�es it
policies, processes and procedures in a way that can
ly across the Corpora�on. By using the ‘Risk Control audits and directly reports to the Corpora�on’s Board
iden�fy all those risks stemming from its ac�vi�es that
Self-Assessment’ techniques and working with ERMD, and SBP’s Board of Directors, currently conducts the
can influence the organiza�onal capacity in fulfilling its
departments can iden�fy their risks and implement Corpora�on’s internal audit. The purpose of internal
mandate. Some of the key risk areas includes following;
suitable controls. These controls are reviewed and audit is to evaluate and validate the adequacy, effec-
agreed upon regularly. Risk controls are used to reduce �veness and proper func�oning of the Corpora�on’s
• Timely availability of sufficient funds,
the quantum of risks that exceed the Corpora�on’s risk risk management, control and governance systems. It
appe�te based on the risk thresholds levels established also assesses the implementa�on and efficacy of
• Ensuring zero tolerance level in accuracy of Single
in its risk management framework. Among risks in the deposit protec�on framework, risk management prac-
Depositor View Database,
risk library under the ERM framework, one of the �ces and risk analysis methods across various opera-
classifica�ons is for the financial risks that mainly �ons and func�ons within the Corpora�on.
• Effec�ve coordina�on arrangement with the banking
includes those pertaining to liquidity, market and credit
supervisor; and
exposures. The financial risk management policy seeks
to ensure that the Corpora�on has adequate financial
• Implemen�ng most efficient procedures for reim-
resources available for running its opera�ons and to
bursement to the protected depositors, keeping in
meet its commitments in case of any possible payout
view the statutory �melines.
event. DPC manages the investment por�olio under
the investment policy and within guidelines that are
To promote effec�ve risk management, all departments
approved by the Board and Management Investment
of the Corpora�on are involved in the risk iden�fica�on
36 Annual Report 2022-23 Key Financial Highlights 37
Graphical Presentation
TTotal
To tal Investment (PKR in Mn) Reserves (PKR in Mn)
Key Financial Highlights 2023 100,128 2023 78,735

2022 68,232 2022 53,848

2021 45,306 2021 36,270

INVESTMENTS DP WAQF 2020 24,597 2020 22,141

PKR 100,128 47% 55% PKR 20,838 2019 12,566 2019 9,829
Million Million
- 20,000 40,000 60,000 80,000 100,000 120,000 - 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000

Total Assets (PKR in Mn) DP Waqf (PKR in Mn)

Key
TOTAL ASSETS TOTAL INCOME
Financial 2023 100,158
PKR 100,158 47% 45% PKR 32,768 2023 20,838

Million Highlights Million 2022 68,285

2022 13,406

2021 45,318 2021 8,497

2020 5,022
2020 27,689
2019 2,238
GENERAL & ADMIN. 2019 12,618
RESERVES -
EXPENSES
PKR 78,735
5,000 10,000 15,000 20,000 25,000

PKR 139
- 20,000 40,000 60,000 80,000 100,000 120,000
46% 25%
Million Million
Premium Income (PKR in Mn) Investment Income (PKR in Mn)

2023 19,005 2023 13,763

2022 17,051 2022 5,547

2021 14,640 2021 3,054

2020 12,773 2020 2,402

2019 11,533 2019 654

- 5,000 10,000 15,000 20,000 - 5,000 10,000 15,000

Total Expenses (PKR in Mn) Net Profit (PKR in Mn)

2023 449 2023 32,319

2022 111 2022 22,487

2021 90 2021 17,604

2020 80 2020 15,095

2019 120 2019 12,068

- 100 200 300 400 500 - 10,000 20,000 30,000 40,000

 CANADA

38 Annual Report 2022-23 Key Financial Highlights 39

Five Years’ Ver�cal Analysis Investment Maturity Buckets (PKR in Mn)
(Based on Remaining Term to Maturity)
protected depositors of SME Bank, amoun�ng to PKR
41 million. The bank was declared as a failed ins�tu-
Statement of Financial Posi�on 5,089 2,369
�on on May 10, 2023 by the State Bank of Pakistan. A
Amount in PKR Million
sum of PKR 40 million represents the outstanding
2023 2022 2021 2020 2019 payment owed to the State Bank of Pakistan in respect
Assets of reimbursement against various expenses.
Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
42,018
Cash and cash 6 0.01% 3 0.00% 3 0.01% 3,066 11.07% 48 0.38% 49,255
Net assets of the Corpora�on, at the close of fiscal
equivalents
year 2023 stood at PKR 100,073 million compared to
Investment 100,128 99.97% 68,232 99.92% 45,306 99.97% 24,597 88.84% 12,566 99.59% PKR 67,754 million last year, depic�ng an increase of
securi�es 1,397 48 percent due to steady increase in premium collec-
Fixed assets 6 0.01% 7 0.01% 5 0.01% 3 0.01% 4 0.03%
�ons and significant increase in income on invest-
Prepayments 18 0.01% 44 0.07% 4 0.01% 23 0.08% 0 0.00% 1 Month or less 1 to 6 Months 6 to 12 Months 1 to 3 Years 3 to 5 Years ments.
and other
receivables
Total Assets 100,158 100.00% 68,286 100.00% 45,318 100.00% 27,689 100.00% 12,618 100.00%
20,845 million. These amounts also include accrued The equity includes PKR 500.0 million of paid-up
returns thereon. capital from the State Bank of Pakistan (SBP), PKR
Liabili�es 78,735 million accumulated profits from conven�onal
Payable to SBP 40 0.04% 45 0.07% 26 0.06% 24 0.09% 47 0.37% The predominant current liability on the Corpora�on's banking opera�ons, and PKR 20,838 million accumu-
Payable to 41 0.04% - - - - - - - - balance sheet is the outstanding obliga�on towards lated funds under DP Waqf.
Protected
Depositors Amount in PKR Million
Other liabili�es 4 0.00% 487 0.71% 25 0.05% 2 0.00% 3 0.02% Statement of Profit and Loss
Total Liabili�es 85 0.08% 532 0.78% 51 0.11% 26 0.09% 50 0.39% 2023 2022 2021 2020 2019

100,073 99.92% 67,754 99.22% 45,267 99.89% 27,663 99.91% 12,568 99.61% Head of Account Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
Net Assets
Represented By: Income from 19,005 58.00% 17,051 75.45% 14,640 82.74% 12,773 84.17% 11,533 94.63%
Share capital 500 0.50% 500 0.73% 500 1.10% 500 1.81% 500 3.98% premium
contribu�on
Reserves 78,735 78.61% 53,848 78.86% 36,270 80.03% 22,141 79.96% 9,830 78.21% Investment income 13,763 42.00% 5,547 24.55% 3,054 17.26% 2,402 15.83% 654 5.37%
DP Waqf 20,838 20.81% 13,406 19.63% 8,497 18.75% 5,022 18.14% 2,238 17.81% and profit on Lorem ipsum
deposits
Total Equity 100,073 99.92% 67,754 99.22% 45,267 99.89% 27,663 99.91% 12,568 99.61% Total income 32,768 100.00% 22,598 100.00% 17,694 100.00% 15,175 100.00% 12,187 100.00%

Note: For Ver�cal Analysis, percentages have been calculated based on total assets. General & (139) (0.42%) (111) (0.49%) (90) (0.51%) (80) (0.53%) (120) (0.98%)
Administra�ve
Expenses
Provision against (310) (0.95%) - - - - - - - -
The total assets of the Corpora�on witnessed a reimbursement
remarkable growth over the last five years and stood at Security Wise Investments (PKR in Mn) claims
PKR 100,158 million as of June 30, 2023. The invest- Total Expenses (449) (1.37%) (111) (0.49%) (90) (0.51%) (80) (0.53%) (120) (0.98%)
ments, a major asset of the Corpora�on, recorded a 17,604 99.49% 15,095 99.47% 12,067 99.02%
20,845
Net Profit 32,319 98.63% 22,487 99.51%
manifold growth over five years and closed at PKR (21%)
37,281
100,128 million from PKR 12,566 million in 2019. This 42,002
(37%) Note: For Ver�cal Analysis, percentages have been calculated based on total income which is the sum of income from premium
can be a�ributed to a number of factors, including (42%) contribu�on, investment income and profit on deposits.
steady increase in premium income, resul�ng from
increase in deposits of the banking industry, prudent Over the past five-year period, income from premium shown significant growth during the five-year period.
and efficient management of funds and favourable contribu�on has progressively increased. Star�ng at In 2023, the income from this source reached PKR
yields on the government securi�es due to �ghter MTBs PIBs Sukuks PKR 11,533 million in 2019, it grew to PKR 19,005 13,763 million, marking 148 percent increase from
monetary policy stance. million in 2023. On year on year basis, the income the previous year. This substan�al growth indicates
MTBs to the tune of PKR 37,281 million, while medium from premium contribu�on increased by 11%. ac�ve management of investment in the government
The highly liquid investment por�olio comprises of and long term segments, viz., Pakistan Investment securi�es as per approved investment policy and likely
treasury securi�es of various tenors: short-term, i.e. Bonds (PIBs) of PKR 42,002 million and Sukuk of PKR Investment income and profit on deposits have also favorable market condi�ons that contributed to the

40 Annual Report 2022-23
financial strength of the Corpora�on.
The total expenditure of the Corpora�on in 2023 is
PKR 449 million. This represents a growth of over 305
percent from 2022. This significant increase in expen-
ditures emanated from an extraordinary outlay of
PKR 310 million for the provision against reimburse-
ment of claims from SME Bank. Over the years, the
general and administra�ve expenses have been
rela�vely low depic�ng an overall opera�onal
efficiency of the Corpora�on.
CANADA
The net profits have consistently increased over the
five-year period. Star�ng at PKR 12,067 million in
2019, it reached PKR 32,319 million in 2023 showing a
YoY increase of 44 percent in 2023. This reflects a
posi�ve growth trend, with significant increases in
both premium contribu�ons and income on invest-
ments. These trends demonstrate the Corpora�on’s
effec�ve management and its commitment to accu-
mulate credible pool of funds to fulfill its crucial man-
date of protec�ng depositors’ money and contribut-
ing to the stability of the banking system.
 41

DEPOSIT PROTECTION CORPORATION

FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2023
 CANADA
42
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 CANADA

44 45
- )('. '. #)%. $%&"''#"
. &'%('(%. ". #"'"'. #. '. "". &'' "'&
. DEPOSIT PROTECTION CORPORATION
"(".'.&#&(%&
. ".*'%.'."". &'' "'&.%$%&"'.'.("%+". STATEMENT OF FINANCIAL POSITION
'%"&'#"&.".)"'&.".. ""%.''.)&.%.$%&"''#" AS AT JUNE 30, 2023
. # ("'. *'. '#&. %. *'. #)%"". %%".  #". #'%. !''%&. '.
$"". &#$. ". ' ". #. '. ('. ". &""'. ('. ""&
. "(". "+. &""'. Note 2023 2022
"&."."'%".#"'%#.''.*."'+.(%".#(%.('. ------------(Rupees in '000)------------
Assets

Cash and cash equivalents 5 6,049 2,866

#%#*. (&&".#((%+..## Investment in securities 6 100,128,011 68,231,599
#%'%. #("'"'& Fixed assets 7 5,906 6,640
Prepayments and other receivables 8 17,699 44,465
Total assets 100,157,665 68,285,570

Liabilities
     . ##
+% Payable to State Bank of Pakistan 9 39,625 45,048
Payable to Protected Depositors 10 41,320 -
5$).  * ,() Other liabilities 11 4,134 486,810
85,079 531,858

Net assets 100,072,586 67,753,712

Equity and Fund

Share capital 12 500,000 500,000

Reserves 13 78,735,116 53,847,626
79,235,116 54,347,626

DP Waqf 14 20,837,470 13,406,086

Total 100,072,586 67,753,712

Contingencies and commitments 15

The annexed notes from 1 to 26 form an integral part of these financial statements.

Dr. Inayat Hussain Muhammad Akmal

Board Chairman Managing Director
 CANADA

46 47
DEPOSIT PROTECTION CORPORATION DEPOSIT PROTECTION CORPORATION
STATEMENT OF PROFIT OR LOSS STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2023
AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED JUNE 30, 2023
Note 2023 2022
Note 2023 2022 ------------(Rupees in '000)------------
------------(Rupees in '000)------------ CASH FLOWS FROM OPERATING ACTIVITIES
Net profit for the year 32,318,874 22,486,907
Adjustments for:
Income from premium contribution 16 19,005,538 17,050,683 7
Depreciation 1,856 1,594
Fixed Assets and others - 582
Investment income and profit on deposits 17 13,762,780 5,547,142 Profit for the year after non-cash and other items 32,320,730 22,489,083

Total income 32,768,318 22,597,825 (Increase) / decrease in assets:

Pre-payments and other receivables 8 26,766 (40,671)

General and administrative expenses 18 (138,882) (110,918) Increase / (decrease) in liabilities:

Payable to State Bank of Pakistan (5,423) 18,949
Provision against reimbursement claims 19 (310,562) - Payable to Protected Depositors 10 41,320 -
Other liabilities (482,676) 462,023
Total Expenses (449,444) (110,918) Net cash generated from operating activities 31,900,717 22,929,384

CASH FLOWS FROM INVESTING ACTIVITIES

Net profit for the year 32,318,874 22,486,907 Net Investments made during the year (31,896,412) (22,925,306)
Additions to fixed assets (1,122) (3,895)
Other comprehensive income - - Net cash used in investing activities (31,897,534) (22,929,201)

CASH FLOWS FROM FINANCING ACTIVITIES

Total comprehensive income for the year 32,318,874 22,486,907
Capital contribution from State Bank of Pakistan - -
Net cash flow from financing activities - -

The annexed notes from 1 to 26 form an integral part of these financial statements. Increase/(decrease) in cash and cash equivalents during the year 3,183 183
Cash and cash equivalents at beginning of the year 2,866 2,683
CASH AND CASH EQUIVALENTS AT END OF THE YEAR 5 6,049 2,866

The annexed notes from 1 to 26 form an integral part of these financial statements.

Dr. Inayat Hussain Muhammad Akmal

Board Chairman Managing Director
Dr. Inayat Hussain Muhammad Akmal
Board Chairman Managing Director
 CANADA

48 49
DEPOSIT PROTECTION CORPORATION
DEPOSIT PROTECTION CORPORATION Notes to the Financial Statements
STATEMENT OF CHANGES IN EQUITY AND FUND
FOR THE YEAR ENDED JUNE 30, 2023
FOR THE YEAR ENDED ON JUNE 30, 2023

Share Reserves Sub-Total DP Waqf Total 1 STATUS AND NATURE OF OPERATIONS

Note Capital
------------- (Rupees in '000) -------------
Deposit Protection Corporation (the Corporation) was established in 2016 through an Act of
Balance as at July 1, 2021 12 500,000 36,269,712 36,769,712 8,497,093 45,266,805 Parliament named Deposit Protection Corporation Act, 2016 (the Act) for protection of small
depositors in order to ensure financial stability of, and to maintain public trust in, the financial
Net profit for the year 13 & 14 - 17,577,914 17,577,914 4,908,993 22,486,907 system of Pakistan. The objective of the Corporation under the Act is to compensate the small
Other comprehensive income - - - - - depositors for losses incurred by them to the extent of protected deposits, up to the prescribed
- 17,577,914 17,577,914 4,908,993 22,486,907
amount i.e. Rs 500,000, on per depositor per bank basis, in the event of failure of a member
Balance as at June 30, 2022 500,000 53,847,626 54,347,626 13,406,086 67,753,712 institution as and when notified by the State Bank of Pakistan (SBP) under section 21(1) of the Act.
The Corporation was established as a subsidiary of SBP and pursuant to section 9 of the Act, initial
capital contribution of Rs. 500 million was made by SBP upon which no dividend is payable.
Net profit for the year 13 & 14 - 24,887,490 24,887,490 7,431,384 32,318,874
Other comprehensive income - - - - -
The Corporation is incorporated and domiciled in Pakistan and commenced its business with effect
- 24,887,490 24,887,490 7,431,384 32,318,874
from June 01, 2018 having perpetual succession. The head office of the Corporation is located at
Balance as at June 30, 2023 500,000 78,735,116 79,235,116 20,837,470 100,072,586 State Bank of Pakistan Building, Bolton Market, M.A. Jinnah Road, Karachi, in the province of
Sindh, Pakistan.

The annexed notes from 1 to 26 form an integral part of these financial statements. The Corporation provides separate Deposit Protection Mechanism (DPM) for Conventional and
Islamic Banking Institutions (IBIs). Shariah compliant DPM for IBIs is approved by SBP's Shariah
Advisory Committee and Corporation's Board. The statement of financial position, statement of profit
or loss and statement of cash flows of Islamic operations of the Corporation are separately
Dr. Inayat Hussain Muhammad Akmal presented in Note 20”.
Board Chairman Managing Director
2 BASIS OF PREPARATION

2.1 Statement of compliance

These financial statements have been prepared in accordance with the accounting and reporting
standards as applicable in Pakistan. The accounting and reporting standards applicable in
Pakistan comprise of:

- International Financial Reporting Standards (IFRSs), as issued by the International Accounting

Standards Board (IASB); and

- Provisions of and directives issued by SBP.

Where provisions of and directives issued under the IFRSs differ from the provisions of and
directives issued by SBP, the provisions of and directives issued by SBP have been followed.

2.2 Basis of measurement

These financial statements have been prepared under the historical cost convention, except as
disclosed otherwise.
50
2.3 Functional and presentation currency
These financial statements are presented in Pakistani Rupees (PKR), which is the Corporation’s
functional and presentation currency. All amounts have been rounded to the nearest thousand,
unless otherwise indicated.
2.4 Uses of estimates and judgment
The preparation of financial statements in conformity with IFRSs requires management to make
judgments, estimates and assumptions that affect the application of policies and reported
amounts of assets and liabilities that are not readily available from other sources. The estimates
and associated assumptions are based on historical experiences and various other factors that
are believed to be reasonable under the circumstances, the result of which form the basis of
making judgments about the carrying values of assets, liabilities, income and expenses.
Actual results may differ from these estimates. The estimates and underlying assumptions are
reviewed on an ongoing basis.
Revisions to accounting estimates are recognized in the period in which the estimate is revised if
the revision affects only that period, or in the period of revision and future periods if the revision
affects both current and future periods. Judgments made by the management in the application
of IFRSs and estimates that have a significant risk of material adjustment to the carrying
amounts of assets and are as follows:
51
- Determining criteria for significant increase in credit risk;
- Choosing appropriate models and assumptions for the measurement of ECL;
- Establishing the number and relative weightings of forward-looking scenarios for each type of
product/market and the associated ECL; and
- Establishing groups of similar financial assets for the purposes of measuring ECL.
2.4.3 Useful life and residual value of fixed assets
Estimates of useful life and residual value of fixed assets are based on the management’s best
estimate.
2.4.4 Provision against protected deposits
Estimates of the provisions or obligation arising in the event of failure of member institution(s) are
accounted for in accordance with SBP's Instructions as described in note 4.7.
3 NEW AND AMENDED STANDARDS AND INTERPRETATIONS
3.1 Standards, amendments to approved accounting standards effective in current year
There were certain amendments to approved accounting standards and interpretations that are
mandatory for the financial year beginning on July 01,2022. However, these are considered not to be
relevant or to have any significant effect on the Corporation’s financial reporting and operations and,
therefore, have not been disclosed in these financial statements.

2.4.1 Fair value of financial instruments 3.2 Standards, amendments to approved accounting standards and interpretations that
are not yet effective and have not been early adopted by the Corporation
The fair value of financial instruments is the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction in the principal (or most advantageous) market at The following new standards, amendments to published standards and interpretations would be
the measurement date under current market conditions (i.e. an exit price) regardless of whether effective from the dates mentioned below against the respective standard or interpretation.
that price is directly observable or estimated using another valuation technique. When the fair
values of financial assets recorded in the statement of financial position cannot be derived from Effective Date
active markets, they are determined using a variety of valuation techniques that include the use Standard or Interpretation (Annual periods beginning
of valuation models. The inputs to these models are taken from observable markets where on or after)
possible, but where this is not feasible, estimation is required in establishing fair values.
Judgements and estimates may include items like considerations of liquidity and model inputs IAS 1 - Classification of Liabilities as Current or January 1, 2024
related to items such as credit risk (both own and counterparty), funding value adjustments, Non-current (Amendments)
correlation and volatility. IAS 1 - Disclosure of Accounting Policies (Amendments) January 1, 2023
IAS 8 - Definition of Accounting Estimates (Amendments) January 1, 2023
2.4.2 Expected credit loss allowance on financial asset IAS 12 - Deferred Tax related to Assets and Liabilities January 1, 2023
arising from a Single Transaction (Amendments)
The measurement of the Expected Credit Loss allowance (ECL) for financial assets measured
at amortized cost and Fair Value through Other Comprehensive Income (FVOCI) is an area that There are number of other standards, amendments and interpretations to the approved accounting
requires the use of complex models and significant assumptions about future economic standards that are not yet effective and are also not relevant to the Corporation and therefore, have
conditions and credit behavior (e.g. the likelihood of customers defaulting and the resulting not been presented here.
losses).
4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A number of significant judgements are also required in applying the accounting requirements for
measuring ECL, such as: The significant accounting policies applied in preparation of these financial statements are set out
below.
 CANADA

52 53
4.1 Cash and cash equivalents
4.2.1.2 Trade date accounting

Cash and cash equivalents include notes and coins on hand, unrestricted balances held with
All purchases and sales of investments that require delivery within the time frame established by the
subsidiary of SBP which is SBP Banking Services Corporation i.e. (SBP-BSC) and Islamic Banking
regulations or market conventions are recognized on the trade date. Trade date is the date on which
Institutions (IBIs). Cash equivalents are carried at amortized cost in the statement of financial
the Corporation commits to purchase or sell the investments.
position, which approximates fair value due to their short term nature.

4.2.1.3 Initial recognition and measurement

4.2 IFRS 9 - Financial Instruments

Financial assets are initially recognized at fair value plus transaction costs except for financial
4.2.1 Financial assets
assets carried at fair value through profit or loss. Financial assets carried at fair value through profit
or loss are initially recognized at fair value while the related transaction costs are expensed out in
4.2.1.1 Classification
profit or loss.

The Corporation classifies its financial assets in the following categories: financial assets at
4.2.1.4 Subsequent measurement
amortized cost, financial assets at fair value through profit or loss (FVTPL) and financial assets at
fair value through other comprehensive income (FVOCI). The classification depends on the business
Financial asset at amortized cost
model in which the financial asset is managed and its contractual cash flows. The management
determines the appropriate classification of its financial assets at initial recognition and it evaluates
Subsequent to initial recognition, financial assets classified as amortized cost are carried at
this classification on a regular basis.
amortized cost using the effective interest rate / profit method.

The assessment by the management is based on the facts and circumstances that existed at the
Gains or losses are also recognized in the statement of profit or loss when financial assets carried
date of initial application about the determination of business model within which a financial asset is
at amortized cost are derecognized or impaired.
held and the designation and revocation of previous designation of certain financial assets as
measured at FVTPL.
Financial asset at fair value through other comprehensive income

The financial assets are categorized as follows:

Subsequent to initial recognition, financial assets classified as fair value through other
comprehensive income are carried at fair value.
Financial asset at amortized cost

Net gains and losses arising from changes in the fair value and on sale of financial assets at fair
Financial asset is held within a business model whose objective is to collect the contractual cash
value through other comprehensive income are taken to the statement of other comprehensive
flows, and the contractual terms give rise to cash flows that are solely payments of principal and
income.
interest (SPPI) are classified as financial asset at amortized cost.

Financial asset at fair value through profit or loss

Financial asset at fair value through Other Comprehensive Income

Subsequent to initial recognition, financial assets classified as fair value through profit or loss are
Debt investment
carried at fair value.

Debt investment where the contractual cash flows are SPPI and the objective of the business model
Net gains and losses arising from changes in the fair value and on sale of financial assets at fair
includes both by collecting contractual cash flows and selling financial assets are classified as
value through profit or loss are taken to the statement of profit or loss.
financial asset at fair value through other comprehensive income.

4.2.1.5 Derecognition
Financial asset at fair value through profit or loss

Financial assets are derecognised when the contractual right to future cash flows from the asset
Debt investment
expires or is transferred along with the risk and reward of ownership of the asset. Any gain or loss
on derecognition of the financial assets is taken to statement of profit or loss currently.
Debt investments that do not qualify for measurement at either amortized cost or FVOCI are
classified as financial asset at fair value through profit or loss.
4.2.2 Financial Liability

4.2.2.1 Classification
54
4.2.2 Financial Liability
4.2.2.1 Classification
Financial liability at amortized cost
Financial liabilities, other than fair value through profit or loss are measured at amortized cost using
the effective interest rate/ profit method.
Financial liability at fair value through profit or loss
Financial liabilities designated at fair value through profit or loss requires that the amount of
change in the fair value of a financial liability that is attributable to changes in the credit risk of that
liability is presented in other comprehensive income, unless the recognition of such changes in other
comprehensive income would create or enlarge an accounting mismatch in statement of profit or
loss.
4.2.2.2 Initial recognition and measurement
Financial liabilities are initially recognized at fair value less transaction cost except for financial
liabilities carried at fair value through profit or loss. Financial liabilities carried at fair value through
profit or loss are initially recognized at fair value while the related transaction cost are expensed out
in statement of profit or loss. Financial liabilities are not recognized unless one of the parties has
performed its part of the contract or the contract is a derivative product.
4.2.2.3 Subsequent measurement
Financial liability at amortized cost
All financial liabilities are subsequently measured at amortized cost, except for those measured at
fair value through profit or loss.
Gains or losses are also recognized in the statement of profit or loss when financial liabilities carried
at amortized cost are derecognized.
Financial liability at fair value through profit or loss
Subsequent to initial recognition, financial liabilities classified as fair value through profit or loss are
carried at fair value using market rate of interest.
Net gains and losses arising from changes in the fair value due to change in credit risk are taken to
other comprehensive income and other change in fair value and on sale of financial liabilities at fair
value through profit or loss are taken to the statement of profit or loss.
4.2.2.4 Derecognition
Financial liabilities are derecognised when they are extinguished, that is, when the obligation
specified in the contract is discharged, cancelled, or expires. Any gain or loss on derecognition of
the financial liabilities is taken to statement of profit or loss currently.
55
4.3 Impairment of financial assets
The Corporation assesses its financial assets measured at amortized cost and debt instruments
at FVOCI for ‘Expected Credit Loss’ (ECL). The Corporation recognizes the 12 month expected
credit losses (the portion of lifetime expected credit losses from default events that are expected
within 12 months of the reporting date) if credit risk has not significantly increased since initial
recognition (stage 1), and lifetime expected credit losses for financial assets for which the credit
risk has increased significantly since initial recognition (stage 2) or which are credit impaired
(stage 3). The Corporation has adopted following policy for migration of financial assets from
stage 1 to stage 2 and stage 3.
Stage 1: includes financial instruments that do not have a significant increase in credit risk since
initial recognition or that has low credit risk at the reporting date. For these assets, 12-month
expected credit losses (‘ECL’) are recognized and interest revenue is calculated on the gross
carrying amount of the asset (i.e. without deduction for credit allowance). 12-month ECL are the
expected credit losses that result from default events that are possible within 12 months after the
reporting date.
Thus, the Corporation considers financial assets at Stage 1 and do not conduct assessments for
significant increase in credit risk as long as the minimum credit rating of such assets remains
investment grade.
The Corporation classifies financial assets held under Market Treasury Bills, Pakistan Investment
Bonds and GoP Ijara sukuks as Stage 1 assets since the assets held under these portfolios
deemed to have low credit risk.
Stage 2: includes financial instruments that have a significant increase in credit risk since
initial recognition (unless they have low credit risk at the reporting date) but that do not have
objective evidence of impairment. For these assets, lifetime ECL are recognized, but interest
revenue is still calculated on the gross carrying amount of the asset. Lifetime ECL are the
expected credit losses that result from all possible default events over the expected life of the
financial instrument.
The Corporation will classify financial assets as Stage 2 assets if the minimum credit rating of
financial assets fall below investment grade credit rating i.e. BBB-.
Exposures move back to stage 1 once they no longer meet the criteria for a significant increase in
credit risk as specified above.
Stage 3: includes financial assets that have objective evidence of impairment at the reporting date.
For these assets, lifetime ECL are recognized and interest revenue is calculated on the net carrying
amount (i.e. net of credit allowance).
4.4 Premium receivable
As of June 30, 2023, premium contributions receivable comprise of premium due but not received
from respective member institution(s). Premium receivable is carried at amortized cost in the
statement of financial position.
4.5 Impairment of non-financial assets
56 57
4.5 Impairment of non-financial assets
In line with SBP's directive, the Corporation shall start accruing its provision against protected
The carrying amounts of the Corporation’s assets are reviewed at each balance sheet date to
deposits and related liabilities only on and from the date on which SBP issues a notification under
determine whether there is any indication of impairment of any asset or a group of assets. If such
section 21(1) of the Act declaring a member as a failed institution on the occurrence of specified
indication exists, the recoverable amount of such assets is estimated. The recoverable amount is
statutory events.
higher of an asset's fair value less cost to sell and value in use. In assessing the value in use, future
cash flows are estimated which are discounted to present value using a discount rate that reflects
4.8 Revenue recognition
the current market assessments of the time value of money and the risk specific to the asset. In
determining fair value less cost to sell, an appropriate valuation model is used. An impairment loss 4.8.1 Premium contribution
4.8.1 Premium contribution
is recognized in the profit or loss account whenever the carrying amount of an asset or a group of
assets exceeds its recoverable amount. Impairment loss on revalued assets is adjusted against the Premium
Premium revenue
revenueisisrecognized
recognizedatatthe
thefair
fairvalue
valueofofthe
theconsideration
considerationreceived against
received deposit
against deposit
related revaluation surplus to the extent that the impairment loss does not exceed the surplus on protection services and reported as income proportionately over the fiscal year. Premiums are
revaluation of that asset. legislated by the DPC Act and are determined annually based on the amount of eligible deposits
held by member institutions as at December 31st of the preceding calendar year, and they are
4.6 Fixed Assets
payable quarterly in four equal installments.
4.6.1 Recognition and measurement
4.8.2 Interest income / profit earned
Fixed assets are measured at cost less accumulated depreciation and any impairment losses.
Cost includes all expenditures that are directly attributable to the acquisition of the asset. Any Interest income / profit earned is recognized in the statement of profit or loss using the effective
gain or loss on disposal of an item of fixed asset (calculated as the difference between the net interest rate / profit method. The effective interest / profit rate is the rate that exactly discounts the
proceeds from disposal and the carrying amount of the item) is recognized within other income in estimated future cash receipts and payments through the expected life of the financial asset (or,
profit or loss. where appropriate, a shorter period) to the carrying amount of the financial asset. When calculating
the effective interest / profit rate, the Corporation estimates future cash flows considering all
4.6.2 Subsequent costs contractual terms of the financial instrument.

A subsequent expenditure is capitalized only when it is probable that the future economic benefits The calculation of the effective interest / profit rate includes all transaction costs and fees paid or
from the expenditure will flow to the Corporation. Ongoing repairs and maintenance are expensed as received that are an integral part of the transaction. Transaction costs include incremental costs
incurred. that are directly attributable to the acquisition or issue of a financial asset.

4.6.3 Depreciation 4.9 Expenses

Depreciation is calculated to write off the cost of items of fixed assets less their estimated residual Expenses are recognized on actual as well as on accrual basis.
values using the straight-line basis over their estimated useful lives. Depreciation is recognized in
profit or loss.
4.10 Share capital

The estimated useful lives for the current and comparative periods of significant items of fixed
Share capital comprise the contribution paid by the State Bank of Pakistan in accordance with
assets are as follows:
Section 9 of the Act.

• Furniture and Fixtures - 10 Years

4.11 Reserves
• Office Equipment - 5 Years
• Motor Vehicles - 5 Years
Reserves reflects the accumulated surplus from conventional operations of the Corporation.
• EDP Equipment - 3 Years

4.7 Provision against protected deposits

Provisions are recognized when the Corporation has a present legal or constructive obligation as a
result of past events, it is probable that an outflow of economic resources will be required to settle
the obligation and a reliable estimate of the amount can be made. Provisions are reviewed at each
reporting date and are adjustable to reflect the current best estimates.
 CANADA

58 59
4.12 DP Waqf
5 CASH AND CASH EQUIVALENTS

DP Waqf has been presented separately to disclose the results of Islamic operations under 2023
Shariah Compliant Deposit Protection Mechanism for Islamic Banking Institutions (IBIs) as stated Conventional Islamic Total
---------------- (Rupees in '000) ----------------
under Section 7(3) of the Act.
Current accounts with SBP - BSC 5,324 501 5,825
Each member IBI contributes premium contribution into a separately maintained Islamic bank Cash in hand 51 - 51
Balance with Islamic Banking Institutions (IBIs) - 173 173
account of the Corporation. The Corporation opens and maintains separate Shariah Compliant
5,375 674 6,049
accounts for managing resources of the Corporation related to Islamic operations with prior
approval of its Board. 2022
Conventional Islamic Total
---------------- (Rupees in '000) ----------------
The DP Waqf of Corporation consist of the following:
Current accounts with SBP - BSC 2,057 618 2,675
(i) Periodic premium contribution received from member IBIs net of expenses allocated to Cash in hand 26 - 26
Balance with Islamic Banking Institutions (IBIs) - 165 165
Islamic operations.
2,083 783 2,866

(ii) Return on Shariah compliant investments. 2023 2022

-------------% per annum-------------
Profit on balance with IBIs (%) 4.35 - 10.03 2.46 - 6.62
4.13 Taxation
6 INVESTMENT IN SECURITIES
2023
The income of the Corporation is exempt from tax under section 31 of the Act, and clause 66(xxviii)
Note Conventional Islamic Total
of Part I of the second Schedule to the Income Tax Ordinance, 2001.
---------------- (Rupees in '000) ----------------
Government securities - at amortized
cost

Market Treasury Bills - MTBs 6.1 37,281,565 - 37,281,565

Pakistan Investment Bonds-PIBs 6.2 42,001,800 - 42,001,800
Government of Pakistan (GoP) Ijara
Sukuks 6.3 - 20,844,646 20,844,646
79,283,365 20,844,646 100,128,011

2022
Conventional Islamic Total
---------------- (Rupees in '000) ----------------
Government securities - at amortized
cost

Market Treasury Bills - MTBs 34,120,376 - 34,120,376

Pakistan Investment Bonds-PIBs 20,681,567 - 20,681,567
Government of Pakistan (GoP) Ijara
Sukuks - 13,429,656 13,429,656
54,801,943 13,429,656 68,231,599
600 61
6.1 It represents investments in Government securities of Market Treasury Bills (MTBs) held at 7 FIXED ASSETS
amortized cost with original maturities of twelve months or less. 2023
Furniture Office EDP Motor Total
and fixtures equipment equipment vehicles
6.2 It represents investments in Pakistan Investment Bonds issued by GOP having stated maturity of 5
-------------------------------------------- Rupees in '000 --------------------------------------------
years or less.
As at July 1, 2022
6.3 It represents investments in GOP Ijara Sukuks having stated maturity of 5 years or less. Cost 1,589 1,309 1,936 6,772 11,606
Accumulated Depreciation 709 933 1,910 1,414 4,966
Net book value 880 376 26 5,358 6,640
6.4 The above investments issued by the Government are held at amortized cost. The profile of return
on these securities are as follows: Additions during the year - - 1,122 - 1,122
2023 2022 As at June 30, 2023 880 376 1,148 5,358 7,762
-------------% per annum-------------
Adjustments
Cost - - - - -
Mark-up on MTBs 15.69 - 21.99 10.65 - 15.08 Accumulated depreciation - - - - -
Mark-up on PIBs 21.96 - 21.98 9.00 - 15.40 - - - - -
Government of Pakistan (GoP) Ijara Sukuks 17.65 - 22.68 10.45 - 14.85
Depreciation charge during the year (159) (226) (116) (1,355) (1,856)
As at June 30, 2023 (159) (226) (116) (1,355) (1,856)

Carrying amounts
As at June 30, 2023 721 150 1,032 4,003 5,906

Rate of Depreciation 10% 20% 33% 20%

2022
Furniture Office EDP Motor Total
and fixtures equipment equipment vehicles
-------------------------------------------- Rupees in '000 --------------------------------------------
As at July 1, 2021
Cost 2,495 1,499 1,988 2,877 8,859
Accumulated Depreciation 837 808 1,909 384 3,938
Net book value 1,658 691 79 2,493 4,921

Additions during the year - - - 3,895 3,895

As at June 30, 2022 1,658 691 79 6,388 8,816

Adjustments
Cost (906) (190) (52) - (1,148)
Accumulated depreciation 355 165 46 - 566
(551) (25) (6) - (582)

Depreciation charge during the year (227) (290) (47) (1,030) (1,594)
As at June 30, 2022 (227) (290) (47) (1,030) (1,594)

Carrying amounts
As at June 30, 2022 880 376 26 5,358 6,640

Rate of Depreciation 10% 20% 33% 20%

8 PREPAYMENTS AND OTHER RECIEVABLES 2023 2022

Note -------(Rupees in '000)-------

Premium Receivable - Conventional 13,912 34,575

Premium Receivable - Islamic - 6,103
Withholding Tax Receivable 3,787 3,787
Claims against Reimbursement to Protected Depositors 8.1 - -
17,699 44,465
62 63
2023 2022
-------(Rupees in '000)-------
10 PAYABLE TO PROTECTED DEPOSTORS 2023 2022
8.1 Claims against Reimbursement to Protected Depositors 8.3 310,562 - -------(Rupees in '000)-------
Provision against payments of reimbursement claims 8.4 (310,562) -
- - Total Balance Payable to Protected Depositors 310,562 -
Less: Reimbursement against payments to protected depositors (269,242)
8.2 On May 10, 2023, SME Bank Limited was notified as a failed institution by State Bank of Pakistan in terms of Clause (a) Net Payable to Protected Depositors 41,320 -
of Sub-Section (1) of Section 21 of the Act effective from March 27, 2023. Consequently, a liability of Rs. 310.6 million
was recorded representing the balances payable to eligible depositors of SME Bank upto their protected deposits on
the effective date in accordance with Single Depositor View database as submitted by SME Bank. As directed by SBP, 11 OTHER LIABILITIES 2023 2022
-------(Rupees in '000)-------
DPC initiated the process of reimbursement against payments made by SME Bank to the eligible depositors and a sum of
Rs. 269.2 million was paid till June 30, 2023.
Payable to auditors and others 4,118 1,981
Advance premiums - Conventional Institution(s) 16 461,183
8.3 Section 22 of the Act stipulates that ‘the claim of DPC against the failed institution to the extent of protected deposits
Advance premiums - Islamic Institution(s) - 23,646
paid or to be paid and any arrears of outstanding premium shall have priority to all other claims’. In this context, the 4,134 486,810
claim of DPC against the reimbursement to SME Bank has been treated as a receivable amount.
12 SHARE CAPITAL
8.4 The amount has been fully provided as recovery of the same cannot be ascertained as of reporting date.
2023 2022 2023 2022
9 PAYABLE TO STATE BANK OF PAKISTAN 2023 2022 -------(Number of shares)------- -------(Rupees in '000)-------
-------(Rupees in '000)-------
Authorized Share Capital
Payable to State Bank of Pakistan 9.1 39,625 45,048
1,000 1,000 Ordinary shares of Rs. 1,000,000 each 1,000,000 1,000,000
9.1 This represents the amount payable to State Bank of Pakistan (SBP) in respect of financial arrangements made
to facilitate the operations of the Corporation. As per understanding with SBP, no interest is payable on this Issued, subscribed and paid-up capital
financial arrangement.
500 500 Fully paid-up ordinary shares of Rs. 1,000,000 each 500,000 500,000

Initial contribution of Rs. 500 million was paid by the State Bank of Pakistan on July 03, 2018 and recognized as
share capital in the statement of financial position. The Corporation has allocated Rs. 1 million from paid up capital
as seed money for Shariah compliant deposit protection mechanism of Islamic Banking Institutions.
 64 65
2023 2022
2023 2022
---------------% per annum---------------
13 RESERVES Note -------(Rupees in '000)-------
Interest / profit profile are as under:

Interest rate on MTBs 10.65 to 21.99 7.10 to 15.08

Opening 53,847,626 36,269,712
Net profit for the year 24,887,490 17,577,914
Interest rate on PIBs 7.37 to 23.15 7.46 to 12.13
Accumulated surplus 78,735,116 53,847,626

Profit rate on GoP Ijara Sukuk 15.27 to 22.54 8.23 to 14.50

14 DP Waqf

18 GENERAL AND ADMINISTRATIVE EXPENSES

Opening 13,406,086 8,497,093
2023
Net profit for the year 7,431,384 4,908,993
Note Conventional Islamic Total
Accumulated surplus 20,837,470 13,406,086
---------------- (Rupees in '000) ----------------

15 CONTINGENCIES AND COMMITMENTS

Salaries and other benefits 18.1 86,637 28,379 115,016
Travelling expenses 395 129 524
There were no contingencies and commitments as at June 30, 2023 (June 30, 2022: Nil)
Electricity, gas and water 52 17 69
Depreciation 1,398 458 1,856
16 INCOME FROM PREMIUM CONTRIBUTION 2023 2022
Repairs & maintenance 5,528 1,811 7,339
-------(Rupees in '000)-------
Training 1,980 649 2,629
16.1 Premium contribution income for the current year consists of the following:
Books and newspapers 43 14 57
Postages, telegram / telex and telephone 66 21 87
Premium contribution income on eligible deposits from Member Institutions
Legal and professional 88 29 117
Auditors' remuneration 18.2 490 161 651
- Conventional 14,218,581 13,073,883
Annual membership fee 5,893 1,931 7,824
- Islamic 4,786,957 3,976,800
Stationery & Publication 107 35 142
19,005,538 17,050,683
Others 1,937 634 2,571
104,614 34,268 138,882
16.2 For the year ended June 30, 2023, the Corporation recorded income of annual premium contribution from 33
member institutions, starting from July 2022. The amount of annual premium payable to the Corporation by
the member banks under Section 5(2) of the Act has been calculated by multiplying 0.16% (sixteen
GENERAL AND ADMINISTRATIVE EXPENSES
hundredths of one percent) with their respective eligible deposits, as appearing in the last audited accounts of
2022
respective member institutions.
Note Conventional Islamic Total
---------------- (Rupees in '000) ----------------

17 INVESTMENT INCOME AND PROFIT ON DEPOSITS Note 2023 2022

Salaries and other benefits 18.1 68,475 18,992 87,467
-------(Rupees in '000)-------
Travelling expenses 70 20 90
Electricity, gas and water 38 11 49
Interest income - Conventional securities 17.1 11,084,085 4,590,863
Depreciation 1,248 346 1,594
Profit earned - Islamic securities 17.2 2,678,684 955,607
Repairs & maintenance 10,263 2,846 13,109
Profit earned - Balances with IBIs 17.3 11 672
Training 1,037 288 1,325
13,762,780 5,547,142
Books and newspapers 51 14 65
Postages, telegram / telex and telephone 66 18 84
17.1 Interest Income includes income on Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs) Legal and professional 311 86 397
carried at amortized cost. Auditors' remuneration 18.2 435 121 556
Annual membership fee 3,707 1,028 4,735
17.2 Profit earned includes income on Government of Pakistan (GoP) Ijara Sukuks carried at amortized cost. Stationery & Publication 141 39 180
Others 990 277 1,267
17.3 Profit earned consist of the amount held as deposit with various Islamic Banking Institutions (IBIs)
86,832 24,086 110,918

17.4
17.4 The amounts
The amounts reported
reported above
above include
include interest
interest income
income // profit
profit earned
earned during
during the
the year
year and
and calculated
calculatedusing
using
effective interest
effective interest // profit
profit method.
method.
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20.3 Statement of Cash flows
18.1 Salaries and other benefits to the Corporation's employees are paid through SBP. The retirement benefits of
the Corporation’s employees are accounted for in the books of SBP. Cash flows from operating activities
Net profit for the year 7,431,384 4,908,993
Adjustments for non-cash and other items - -
18.2 Auditor's Remuneration 2023 2022 Profit for the year after non-cash and other items 7,431,384 4,908,993
-------(Rupees in '000)-------
(Increase) / decrease in assets:
Audit fee 625 538 Other assets 6,103 (6,103)
Increase / (decrease) in liabilities:
Out of pocket expenses 26 18
Other liabilities (includes amount allocated to Islamic operations) (22,606) 4,149
651 556
Net cash generated from operating activities 7,414,881 4,907,039

18.3 In accordance with a mechanism as approved by SBP's Shariah Advisory Committee and DPC's Board, Cash flows from investing activities
general and administrative expenses have been allocated between Conventional and Islamic operations on the Investments made during the year in Islamic Securities (7,414,990) (4,906,928)
basis of eligible deposits of Conventional and Islamic member institutions. Additions to equipment -
Net cash used in investing activities (7,414,990) (4,906,928)
19 PROVISION AGAINST REIMBURSEMENT CLAIMS 2023 2022
-------(Rupees in '000)------- Cash flows from financing activities
Seed Money - -
Provision against reimbursement claims 8.3 & 8.4 310,562 - Net cash flow from financing activities - -

Increase/(decrease) in cash and cash equivalents during the year (109) 111
20 ISLAMIC OPERATIONS
Cash and cash equivalents at beginning of the year 783 672
Cash and cash equivalents at end of the year 674 783
The statement of financial position, statement of profit or loss account and cash flow statement of Islamic
operations of the Corporation as at June 30, 2023 and for the year from July 1, 2022 to June 30, 2023 are as 21 FINANCIAL INSTRUMENTS
follows:
21.1 Classification of financial instruments
20.1 Statement of financial position as at June 30, 2023
2023 2022 The table below sets out the carrying amounts of the Corporation’s financial assets and financial liabilities, all
-------(Rupees in '000)------- of which are measured at amortized cost in accordance with IFRS 9.
Assets 2023 2022
Cash and cash equivalents 674 783 -------(Rupees in '000)-------
Investment Securities 6.3 20,844,646 13,429,656 Financial assets
Cash and cash equivalents 6,049 2,866
Premium from Islamic Member Institution and other Receivables 3,787 9,890
Investment securities 100,128,011 68,231,599
Total assets 20,849,107 13,440,329
Premium and other receivables 17,699 44,465
100,151,759 68,278,930
Liabilities
Financial liabilities
Other liabilities 20.1.1 10,637 33,243
Payable to State Bank of Pakistan 39,625 45,048
10,637 33,243 Payable to Protected Depositors 41,320 -
Other liabilities 4,118 1,981
Net assets 20,838,470 13,407,086 85,063 47,029
21.2 Fair value of financial instruments
DP Waqf
Seed Money (allocated from paid up capital) 1,000 1,000 Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable
Accumulated surplus 20,837,470 13,406,086 willing parties in an arm's length transaction and is usually determined by the quoted market price.
Total 20,838,470 13,407,086
The Corporation's policy is to recognize transfers into and out of the different fair value hierarchy levels at the
date of the event or change in circumstances that caused the transfer occurred.
20.1.1 This includes balance amounting to Rs. 10.6 million payable by DP Waqf with respect to allocated expenses
in accordance with a mechanism as approved by SBP's Shariah Advisory Committee and DPC's Board.
Carrying amount of all financial assets and liabilities approximates their fair values.

20.2 Statement of profit or loss account and other 2023 2022

comprehensive income -------(Rupees in '000)-------

Income from premium contribution 4,786,957 3,976,800

Investment income on Islamic securities 2,678,684 955,607
Profit earned on deposits with IBIs 11 672
Total income 7,465,652 4,933,079

General and administrative expenses (34,268) (24,086)

Net profit for the year 7,431,384 4,908,993

Other comprehensive income - -
Total comprehensive income for the year 7,431,384 4,908,993
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22 FINANCIAL RISK MANAGEMENT
22.4 Price Risk
The Corporation's financial risk management policy seeks to ensure that adequate financial resources are
available for the Corporation's activities whilst managing interest rate and rate of return, liquidity, market and Price risk is the risk that the future cash flows of a financial instrument will fluctuate because of
credit risks. The Corporation operates within guidelines that are approved by the Board of Directors and the changes in 'market prices' (other than those arising from interest rate risk or currency risk) whether
Corporation's Investment Policy prescribes to only invest in Government issued or guaranteed securities. those changes are caused by factors specific to the individual financial instrument or its issuer or
factors affecting all similar financial instruments traded in the market. The Corporation is not
exposed to any price risk.
Financial risks that arise from transacting and holding financial instruments include credit, liquidity and market
risks.
23 CAPITAL RISK MANAGEMENT
22.1 Credit risk and concentration of credit risk
The Corporation is not subject to any externally imposed capital requirements. Premium received
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the from members institutions are available and are sufficient to continue the Corporation's operations.
other party to incur a financial loss.
24 RELATED PARTY TRANSACTIONS
The Corporation's portfolio of financial instruments is held in Government securities or securities backed by the
Government which are not subject to credit risk as these represent claims against the Government. 24.1 Transactions with related parties

The Corporation enters into transactions with related parties in its normal course of business.
22.2 Interest Rate Risk
Related parties include key management personnel of the Corporation and State Bank of Pakistan.
Yield / interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of
changes in market interest rates. Transactions with related parties during the year and the balances outstanding with related parties
as at June 30, 2023 are disclosed in the relevant notes to the financial statements.
a) Sensitivity analysis of variable rate instruments
24.2 Key Management Personnel
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate
because of the changes in interest rates. The Corporation's exposure to the risk of changes in interest Key management personnel of the Corporation include members of the Board , Managing Director
rates relates primarily to the Corporation's investment in Ijarah Sukuks and Pakistan Investment Bonds.
who have responsibility for planning, directing and controlling the activities of the Corporation.

Management of the Corporation estimates that increase / decrease of 100 basis points in the interest rate
with all other factors remaining constant, would increase / decrease the Corporation's surplus by Rs. 628 Compensation of key management personnel is as follows;
million (2022: Rs. 309 million). 2023 2022
----- (Rupees in '000) -----

b) Sensitivity analysis of fixed rate instruments Short term benefits 30,476 36,938
Post-employment benefits 2,623 3,336
Fixed rate instruments comprise of Market Treasury Bills measured at amortized cost. Therefore, the Total remuneration of key management personnel 33,099 40,274
Corporation's income from these investments is substantially independent of changes in market interest
rates.
The remuneration of key management personnel includes the remuneration of the Managing Director
22.3 Liquidity risk of the Corporation.

Liquidity risk is defined as the risk that funds will not be available to the Corporation to honour its cash 25 POST BALANCE SHEET EVENTS
obligations, whether on- or off-balance sheet, as they arise. As at June 30, 2023, the Corporation is not
exposed to any liquidity risk. No adjusting event occurred at the date of authorization of these financial statements by the Board
of Directors which may have impact on these financial statements.

26 DATE OF AUTHORISATION

These financial statements were authorized for issue on October 27, 2023 by the Board of
Directors.

Dr. Inayat Hussain Muhammad Akmal

Board Chairman Managing Director